FACTS - Several lenders have recently been investigated by the U.S. Department of Housing and Urban Development and other regulatory bodies concerning their use of Marketing Services Agreements and similar types of agreements.
Many others of these contracts were solely designed to get around Section 8 of RESPA. I have seen one investigative case where the lender paid $1,000 for the use of the real estate agency conference room as well as rental agreements for space that gave the loan officer exclusive access to the broker's office at an exorbitant rent.
HUD is always very skeptical toward these types of agreements. The penalties for entering into a sham agreement if found true by HUD include audit, sanctions and possible revocation of FHA approval.
HUD is concerned that an agreement may include fees which are not for bona fide but rather are referral fees and this can be partially determined by the amount of payment vs. the service performed. Does the payment bear a reasonable relationship to the market value of the services rendered, and/or facilities actually furnished? If you are the lender keep good records regarding the services actually rendered. If you are renting premises as the lender you must be able to prove that the amount paid for such rental is fair market value.
HUD has ruled against one lender regarding its agreement because it found that the reviews were no more than an opportunity for the lender to terminate the agreement if the volume of mortgages being referred by the real estate company did not justify the monthly payment. HUD suggested that the lender be suspended even thought the amount paid was a flat fee.
Lenders that would like to enter into legitimate arrangements should certainly consult an attorney knowledgeable on compliance issues prior to entering into them. (63fr29264-29266,6796)
MORAL
As many of you know over the years we have prepared many of these agreements to comply with RESPA. So far as we are aware none of them have ever been challenged. However, we prepared the agreements we did not suggest modifications because in some cases the modifications reduce the probability of being bad but do not eliminate them.
ARIZONA MAN IS SENTENCED TO FIVE YEARS PRISON FOR MORTGAGE FRAUD RESCUE SCHEME
FACTS
On Feb. 27, Luis Belevan of Phoenix was sentenced by U.S. District Judge James A. Teilborg to 60 months imprisonment for his role in a 2009-2010 mortgage rescue scheme that affected at least 1.800 local distressed homeowners. Belevan pleaded guilty in October to conspiring with Brian Prehoda to defraud homeowners into paying an up-front fee of $1,595 to their company, The Guardian Group LLC, based on false promises of mortgage assistance. The Guardian Group targeted its false claims at local Hispanic homeowners. Brian Prehoda is scheduled to be sentenced by Judge Teilborg on March 12.
FBI Special Agent in Charge James L. Turgal, Jr., Phoenix Division, said, “Belevan preyed on distressed Hispanic homeowners who were trying to avoid foreclosure on their homes. Belevan conspired with an associate by making false representations of mortgage rescue assistance which resulted in financial losses to homeowners with no resolution of their mortgage concerns.“
In his guilty plea, Belevan admitted to falsely representing to homeowners and mortgage lenders that The Guardian Group had the financial backing of a $40 billion hedge fund to purchase mortgage notes from the original lenders. Belevan admitted that representations that his company could then refinance the notes at 90 percent of the decreased market value of the property, using a 30-year mortgage and a favorable interest rate, were also false.
According to the scheme, homeowners would benefit by avoiding foreclosure and obtaining a decreased mortgage balance, a lower interest rate, and lower monthly mortgage payments. The Guardian Group had no financial backing at all, however, and in just 10 months of operation, the company obtained fees from at least 1,800 victim homeowners based on their misrepresentations. The company was shut down by the Arizona Department of Financial Institutions in May 2010 and was then the subject of state and federal investigations.
In addition to 60 months in prison, Belevan was also sentenced to three years of supervised release following imprisonment and was ordered to pay almost $3 million in restitution to the victims. (usattyaz3112)
MORAL
Where have I heard this song before? At least in one other state that I can think of.
ARIZONA MOTHER AND DAUGHTER SENTENCED FOR MORTGAGE FRAUD
FACTS
On Feb, 28, Susan Levy, 70, a Tucson Real Estate agent, and her daughter Risa were sentenced after pleading guilty to federal charges involving mortgage fraud. They pleaded guilty to wire fraud and making false statements in applications for a mortgage loan insured by HUD.
Susan Levy was sentenced to eight months in prison and ordered to pay more than $700,000 in restitution.
Risa Levy was sentenced to three years probation and ordered to pay more than $83,000 in restitution. (lat3512, usattyaz3112)
MORAL
From the sentencing it would seem mother led daughter down the garden path.
FIVE ORANGE COUNTY, CALIFORNIA MEN CHARGED WITH LOAN MODIFICATION FRAUD
FACTS
Five California men, all from Orange County, have been charged with defrauding struggling homeowners who were seeking government mortgage help, federal authorities said.
The men are alleged to have started several fraudulent businesses between January 2009 and now, promising homeowners they could secure loan modifications for an upfront fee that was refundable if no help was obtained. The men simply kept the money and didn't get loan modifications, the statement said.
After their arrests the men were charged with at least seven counts of felony grand theft and various other charges including conspiracy to commit forgery and money laundering.
A 2009 law makes it illegal in California for any person or business to demand, charge, or collect any advance or upfront fee for loan modification work or services. This includes lawyers.
The defendants are: Jacob John Cunningham; Justin Dennis Koelle; Andrew Michael Phalen; Dominic Adam Nolan; and John D. Silva.
They also are accused of regularly changing the names, phone numbers and addresses of the phony companies they operated, including CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, National Mortgage Relief Center, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing and Allied Loan Servicing.
Investigators said Cunningham, Nolan and Silva operated a separate scheme in which they sent out forged "conditional approval" letters to homeowners with forged logos from CitiFiniancial or CitiMortgage. The letters allegedly promised potential victims a lower interest rate and included "escrow instructions" with directing the homeowners to deposit up to $4,600 directly into the defendant's bank accounts. (ap3312)
MORAL
A one-hour consultation with a competent attorney in real estate would have saved all the people thousands of dollars. Remember all the people charged are innocent until proven guilty in a court of law. I trust they have enough money for legal counsel.
WESTLAKE VILLAGE CALIFORNIA MAN PLEADS GUILTY TO RUNNING MORTGAGE FORECLOSURE RESCUE SCAM
FACTS
On March 5, John Marcus Desenberg pleaded guilty before United Stated District Judge Lawrence J. O'Neill to two counts of mail fraud. Desenberg also agreed to the forfeiture of all property and proceeds obtained as a result of such violations, including, but not limited to, a personal money judgment in the amount of $300,000.
Desenberg, doing business as Creative Lending Solutions, devised a scheme targeted at distressed homeowners. It was part of the scheme that Desenberg would get referrals from individuals who marketed a “Fresh Start” program via the Internet, radio, and by advertisements sent through the U.S. mail to California homeowners nearing foreclosure. Desenberg would then contact other individuals with whom he did business in order for them to find an investor to purchase the home from the distressed homeowner. Once this investor was found and the home was sold to the investor, the homeowner would be allowed to stay in their home and would purportedly work on repairing their credit during the specified time period. At the end of the period, the distressed homeowner would be given the option of purchasing their home back from the investor.
It was part of the scheme that Desenberg fraudulently induced homeowners to sign an approval form authorizing some of the sale proceeds to be given to Creative Lending Solutions as payment for fees, including, but not limited to, a finder's fee and a consultation fee in an amount typically ranging from $15,000 to $20,000. He also held back monies from the distressed homeowner for the purported payment of the mortgage for a specified time period, which was typically twelve months. Desenberg promised the homeowners that he would monitor their situation for the 12-month time period, and that either he would make the mortgage payments out of the hold-back reserve money or that he would ensure that the investor made the mortgage payments. Although Desenberg promised these things, he did not monitor their situation and did not ensure the mortgage payments were made. Most homes ended up in foreclosure and victims lost more than $300,000.
The maximum statutory penalty for each count of mail fraud is 20 years in prison, a $250,000 fine, and up to three years' supervised release following incarceration. Sentencing is scheduled for May 21. (USATTEDCA3512)
MORAL
Easy to do. Easy to get caught.
THREE IN CONNECTICUT ARRESTED FOR MORTGAGE FRAUD
FACTS
A federal grand jury sitting in New Haven returned a five-count superseding indictment charging Roger Woodson, also known as “Kwame Nkrumah;” Charmaine Davis and Jacques Kelly with conspiracy and fraud offenses.
The indictment alleges that, from approximately September 2006 to July 2008, Woodson, Kelly, Ronald E. Hutchison Jr., and others conspired to commit mail and wire fraud relating to purchases of numerous homes in New Haven. As part of the conspiracy and in connection with these purchases, Woodson, Kelly, Hutchison and others received millions of dollars in residential real estate loans by submitting materially false loan applications, fictitious leases, and false down payments to mortgage lenders. The defendants disguised from mortgage lenders the true sales price of the houses through the use of two HUD-1 forms, only one of which was sent to the lender, and secret contract addenda. In addition, the buyers often received payments at closing, but those payments were not disclosed to the mortgage lender.
The indictment alleges, in part, that the co-conspirators entered into sales contracts with property sellers for prices that were higher than the actual prices the sellers received at closing. The co-conspirators then executed contract addenda that reflected the actual, lower prices. While the sales contracts bearing the contract price would be disclosed to mortgage lenders, the contract addenda were never disclosed.
The indictment further alleges that, from approximately September 2006 to July 2008, Woodson and Davis, who acted as a mortgage broker, fraudulently obtained more than $1 million in real estate loans in connection with the purchase of additional New Haven properties. As part of the scheme, Woodson, Davis and others submitted fraudulent loan applications, HUD-1 forms, employment verification forms and other documentation to mortgage lenders to obtain financing to purchase properties. Also, as the mortgage broker, submitted loan applications to lenders that falsely stated the borrower's intention to reside in the subject property, and that failed to disclose a complete listing of the borrowers assets and liabilities, including other residential mortgages that Davis brokered for the same borrower.
Woodson and Kelly are charged with one count of conspiracy, one count of mail fraud and one count of wire fraud, and Woodson and Davis are charged with one count of conspiracy and one count of mail fraud. Each of these charges carries a maximum term of imprisonment of 20 years.
The indictment also contains a forfeiture allegation that requires Woodson and Kelly, if convicted of any count of the indictment, to forfeit property and/or a money judgment of at least $5 million, as proceeds of this alleged scheme. If convicted, Davis is subject to forfeiture of at least $800,000.
On Jan. 10, Hutchison pleaded guilty to one count of conspiracy. He awaits sentencing. (usattyct3212)
MORAL
Take note that the federal prosecutors went back six years to 2006 to pick up fraud loans. Take note the one of the fraud offenses alleged is the loan application stating the borrower was going to use the property as his primary residence. Take note—one of the three has already pled guilty. So who do you think is cooperating with the government considering sentencing is at a later date.
NEW JERSEY MAN GETS 33 MONTHS IN PRISON FOR HOME FORECLOSURE RESCUE SCAM
FACTS
On March 1, Stephen French, a Scotch Plains, N.J. man, was sentenced to 33 months in prison for his role in a mortgage fraud scheme he organized through Elite Financial Solutions, a purported home foreclosure rescue company he owned and operated. French previously pleaded guilty to one count of wire fraud conspiracy, admitting he caused more than $1 million in losses through the scheme.
Beginning in February 2005, French devised a scheme to use Elite to fraudulently induce financial institutions to provide mortgage loans to unqualified borrowers, enabling French and his co-conspirators to earn consulting fees from the sales of properties financed by the loans.
Michael Martino, who as an employee of Elite was responsible for recruiting straw buyers for properties in foreclosure, was sentenced on March 15, 2011 to one year and one day in prison. Martino previously pleaded guilty to one count of wire fraud conspiracy before Judge Martini.
French, Martino and others at Elite targeted New Jersey homeowners who could not make mortgage payments and were facing foreclosure. They would promise the homeowners that Elite would help them keep their homes and repair their damaged credit. The homeowners would be instructed to permit title to their homes to be put in the names of straw buyers for one or two years. French promised to improve their credit ratings during that time, help them obtain more favorable mortgages, and ultimately return title to their homes.
French, Martino, and others at Elite told the homeowners that equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses and to repair their credit. Instead, Elite took a “consulting fee” of $25,000 per property, and the remaining equity was deposited into bank accounts French controlled. French, Martino, and others at Elite paid the straw buyers $10,000 for use of their names and credit histories in the transactions, and submitted fraudulent loan applications to mortgage lenders in the straw buyers' names in order to ensure the loans would be approved.
In addition to the prison term, Judge Martini sentenced French to five years of supervised release and ordered to pay restitution of $1,957,525. (usattyjn3112)
MORAL
Did you notice how the prosecutors went back seven years? As I have been saying they are working their way forward in time. They will continue with the years 2007, 2008, 2009, etc.
VIRGINIA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Feb. 28, Ray D. Gata pleaded guilty in federal court to conspiracy to commit wire fraud in connection with a fraudulent foreclosure rescue scheme. Gata faces a maximum penalty of 30 years in prison when he is sentenced on June 11.
From November 2006 until February 2011, Gata and a conspirator engaged in a foreclosure rescue scheme that defrauded homeowners and mortgage lenders. The conspirator promised homeowners that he could save them from foreclosure by arranging a sale of their homes to Gata and other straw borrowers. To further entice the homeowners, the conspirator promised that they could remain in their homes after the sale, pay rent, and he would resell the homes back to them once they were more financially secure. The conspirator and Gata profited from this scheme by taking all of the proceeds from the home sales. To complete the scheme, the conspirator and Gata executed false closing documents that showed the proceeds of the sale going back to the homeowners when, in fact, the proceeds were going to Gata, the conspirator, and the other straw borrowers. The homeowners received nothing from the sale of their homes while the conspirator, Gata and others received in excess of $170,000. In almost every case, the conspirator required the homeowners to pay more in rent to cover a larger mortgage, and ultimately evicted these homeowners from their homes. (usattyedva22812)
MORAL
Indicted in January, guilty in February for crimes committed six years ago. When they get you, they do act fast.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
