CFPB CHASING HOMEBUILDERS IN TEXAS FOR GETTING KICKBACKS FOR REFERRALS
FACTS
On May 17, the Consumer Financial Protection Bureau ordered Texas homebuilder Paul Taylor to surrender more than $100,000 he received in kickbacks for referring mortgage origination business to Benchmark Bank and to Willow Bend Mortgage Co. CFPB is also prohibiting Taylor from engaging in future real estate settlement services, including mortgage origination.
Taylor and Benchmark created and jointly owned Stratford Mortgage Services. With Willow Bend, the pair created and owned PTH Mortgage Co.
In reality both entities were shams designed to allow Taylor to receive the kickbacks. His homebuilding company, Paul Taylor Homes, then referred mortgage origination business to the sham entities. However, the work was actually performed by Benchmark and Willow Bend. The kickbacks were passed through the sham entities back to Taylor through profit distributions and as a payment through a “service agreement.”
The settlement resolves violations of the Real Estate Settlement Procedures Act. Under the terms of the settlement, Taylor has agreed to pay $118,194.20, the full amount of money he received since early 2010 from the kickback schemes. The payment will be deposited in the United States Treasury.
CFPB became aware of Taylor’s conduct related to Benchmark Bank and Stratford through a referral from the Federal Deposit Insurance Corporation. The FDIC separately fined Benchmark Bank for its role in the RESPA violations. A copy of the CFPB’s Consent Order is available here:
MORAL
It would seem CFPB is enforcing now against builders as well as lenders and mortgage brokers. What surprises me is since this would arguably violate the National Banking Act and other criminal codes as set forth in Title 18 of the United States Code and RESPA does have a criminal provision, why was it not prosecuted criminally? Interesting question is it not? Especially since the bank is alleged to be part of the violations.
See how one agency reports to another agency and the builder is now effectively out of business.
FORMER PRESIDENT OF ARIZONA BROKER GROUP PLEADS GUILTY TO STRAW BUYER MORTGAGE FRAUD AND GETS ONE YEAR; SON SENTENCED TO HOUSE ARREST
FACTS
Jerry Craig Sr., the 2006 president of the Arizona Association of Mortgage Brokers pleaded guilty and was sentenced to one year in prison for conspiring to commit wire fraud.
Jerry Craig Sr. was alleged to have misled straw buyers to purchase homes they were not qualified for in order to make the commissions and fees off of roughly $40 million in loans. Craig and his son, Jerry Craig Jr., allegedly made out with roughly $1 million in fraudulent commissions and fees, according to the report.
Inflated home prices documentation requirements during the subprime mortgage boom helped the father and son to commit the fraudulent scheme. Their company, Spectrum Financial Group, was also charged in 2009 with lawsuit from a former employee alleging the company failed to contribute profits to a promised company profit share program, according to Arizona court documents.
The indictment said they recruited straw buyers who wouldn't normally qualify for a mortgage to buy homes at inflated prices, all for kickbacks between $10,000 and $40,000. They authorized more than 100 loans worth more than $40 million, earning enough commission to buy them high-end corporate tents at the Phoenix Open, expensive dinners, condos in Puerto Vallarta and a boat. Court records show Jerry Craig Sr. has been sentenced to a year in prison, while Jerry Craig Jr. has been sentenced to house arrest. Both have been ordered to jointly pay $2.4 million in restitution to First Fidelity Bank. (AZ USDC2:11-cr-01819-ROS )
MORAL
You would think he would know better, at least to the point of not involving his son. However, as to the length of time, the case was filed in 2011 and there are over 400 docket entries over the two-year period leading to conviction.
FORMER HOMEBUILDER EMPLOYEE GUILTY OF BRIBING MORTGAGE BROKER
FACTS
On May 16, Jason Sterlino, a former sales manager with Discovery Sales, part of the Seeno home building empire, pleaded guilty in federal court to paying bribes to a mortgage broker to help secure home loans for homebuyers. He is the second former Seeno employee to take a deal with prosecutors in exchange for cooperating with the FBI in its ongoing investigation of the company.
Sterlino managed new home sales for two Oakland housing developments and agreed in 2007 to pay a mortgage broker $30,000 for every loan funded, prosecutors said. The kickback would secure loans for unqualified buyers through falsified applications, allowing the developer to move homes in a struggling market. Sterlino and the other participants would split the $30,000.
About 20 loans were funded by Bank of America as a result of the scheme, with Sterlino pocketing about $100,000 in cash.
Sterlino, who was charged with one count of bank bribery, is free on bail and will be sentenced Oct. 24. He faces 30 years in prison and a $1 million fine.
In March, Carey Hendrickson, a top sales executive with Discovery Sales, pleaded guilty to one count of wire fraud in exchange for her cooperation in the federal investigation. (sjmercnw51613)
MORAL
When push comes to shove, the first one to the prosecutor wins? Here is an investigation that continued for six years. On average it is about two years of investigation before the federal investigators visit the targets and then two more years or more before the indictment. If your attorney is good, there are possibilities of not being indicted. Your attorney should know what they are and whether you are eligible.
LAS VEGAS ATTORNEY PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On May 15, attorney Stanley A. Walton pleaded guilty to a charge brought against him in February 2011 and investigated prior to that stating that he participated in a scheme to obtain mortgage loans from financial institutions using straw buyers and false loan applications.
Walton admitted to one count of conspiracy to commit bank, mail, and wire fraud and is scheduled to be sentenced by U.S. District Judge James C. Mahan on Aug. 20. Walton faces up to 30 years in prison and a $1 million fine, and has agreed to forfeiture of $750,000.
From about Sept. 22, 2004 through July 24, 2007, Walton conspired with others to fraudulently obtain residential mortgages in order to obtain proceeds from the mortgages for their personal use. Walton recruited straw buyers to purchase homes, while Walton intended to control the ownership interests of the homes, obtain proceeds from the mortgage loans for his own use, and later resell the house for a profit. Walton advised the straw buyers that he would use their names and credit to purchase the homes and would split the profits with them when the homes were re-sold. Walton held himself out to the straw buyers as an attorney with knowledge and skill in these types of transactions and intentionally did not disclose this plan or activity to the financial institution lenders.
Walton made false statements in and caused co-schemers to make false statements in the straw buyers’ loan applications and supporting documents concerning the straw buyers’ income, assets, intent to occupy the homes, and other information. Walton also directed straw buyers to take steps to make it appear they intended to occupy the homes, such as placing utilities in their names. Walton caused loan proceeds to be paid to him by falsely claiming them as attorney’s fees, fraudulently diverting them through real estate agents, and fraudulently having payments made to his company, knowing that this information would be concealed from the lenders.
Walton and the co-schemers fraudulently purchased six homes in Henderson and three homes in Las Vegas. Walton admitted in his plea agreement that the loss caused by his criminal conduct was approximately $3.6 million.
Pamela Black, a mortgage loan officer previously pleaded guilty to one count of conspiracy to commit bank, mail, and wire fraud and was sentenced on July 26, 2012 to time served, three years of supervised release, and ordered to pay approximately $1.2 million in restitution. (usattynv51613)
MORAL
Guess who cooperated with the prosecutors? An investigation starts 2007, four years later the federal prosecutors indicted and two years later he pleads guilty. All in all under investigation over six years. As an attorney he should have seen an attorney at least in 2007 for sound advice. It might have saved him time in prison if that is the judgment pronounced by the court.
NEW JERSEY WOMAN INDICTED FOR MORTGAGE FRAUD THAT STARTED SIX YEARS AGO
FACTS
On May 15, Klary Arcentales was indicted for her role in a long-running, large-scale mortgage fraud scheme that caused millions of dollars in losses, U.S. Attorney Paul J. Fishman announced. She was charged in a five-count indictment with one count of conspiracy to commit bank fraud and four counts of bank fraud, all of which caused losses of at least $2 million.
It is alleged that as early as 2006, Arcentales engaged in a mortgage fraud conspiracy through a company called Premier Mortgage Services. Arcentales, a loan officer at PMS, provided fraudulent documents to financial institutions in connection with mortgage loan applications on behalf of straw buyers to induce those financial institutions to fund mortgage loans. Relying upon those false documents, financial institutions funded mortgage loans. Arcentales then profited illegally by receiving a commission from PMS for each mortgage loan that she closed and also profited illegally by diverting portions of the fraudulently obtained mortgage proceeds for herself.
Lester Soto, previously charged by complaint, was a part-owner of PMS. He also acted as a loan officer on certain PMS mortgage loan applications. Soto took a percentage of PMS’s profits. Soto employed document makers to create fraudulent documents in furtherance of the scheme and put loan officers at PMS, including Arcentales, in contact with these document makers to create other false and fraudulent documents.
Linda Cohen, also previously charged by complaint, was a paralegal who closed transactions on behalf of a licensed New Jersey attorney. Cohen served as the settlement agent on mortgage loans brokered by Arcentales for various properties. Cohen convened closings, received funds from lenders, and prepared HUD-1 forms—which itemize services and fees charged to borrowers for mortgage loans—that purported to reflect the sources and destinations of funds for mortgages on subject properties. In fact, the HUD-1s were neither true nor accurate. At or following the closings, Cohen disbursed mortgage loan proceeds directly to PMS, herself, and others, including in amounts not reflected on the HUD-1s. Cohen received a fee for each fraudulent loan in which she participated.
Antonio Pimenta, previously charged by complaint, owned and managed Kelmar Construction Co., which built properties that were then sold to straw buyers utilizing fraudulent mortgage loans brokered by Arcentales.
Arcentales charges which are each punishable by a maximum potential penalty of 30 years in prison and a fine of $1,000,000. (usattynj51513)
MORAL
Notice again how this went on for seven years before she was indicted. Over the years we have had at least two cases where indictments were not handed down because of our representation. These are two I can distinctly recall. There were probably others, but I would have to check. The point? See your attorney before you talk to the prosecutor or investigators. Or if you have talked to them see your lawyer immediately to mitigate the issues that may have been discussed.
EX-LOAN OFFICER FOR OREGON BANK IS LAST OF 13 DEFENDANTS TO PLEAD GUILTY TO MORTGAGE FRAUD CAUSING LOSS OF $2.6 MILLION
FACTS
On May 16, Jeffrey Sprague pleaded guilty to conspiracy to make false statements to a financial institution, to commit wire fraud, and to commit bank fraud. The charge arose out of the collapse of Desert Sun Development. Sprague admitted that he caused his former employer, West Coast Bank, to lose more than $2.6 million on fraudulent loans.
Sprague, a loan officer at West Coast Bank at the time, falsified loan applications for DSD employees and others by fraudulently inflating their monthly income and falsely claiming these were going to be applicants’ primary residences when he knew these homes were part of DSD’s flipping scheme. Sprague also knew that these loan files contained forged or scanned signatures and other material misrepresentations and omissions. West Coast Bank approved and funded the loans for DSD employees and others based on the loan applications Sprague falsified as well as the other documents that Sprague submitted to the bank that he knew were false.
Out of the DSD investigation, 13 individuals were charged in five indictments, and with Sprague’s plea, all 13 defendants have pled guilty. (usattyor51613)
MORAL
Like I have said many times over the years, put down primary residence on loan application when it is to be investment property and you will get indicted by a federal grand jury.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
