HUD/FHA AUDITS FOR CHANGES OF OWNERSHIP OF MORTGAGEE WITHOUT NOTIFYING HUD OF THE CHANGE
FACTS
On HUD/FHA audits, checks are made to see if the approved mortgagee, whether it is a direct endorsement lenderor a loan correspondent, has changed ownership without properly notifying HUD. This can be done through the minutebook, state notification of change of ownership, signatories to checking accounts, title of the officers on businesscards, and letterhead, memos, etc.
Please remember the following when changing ownership or adding senior officers or deleting them:
* 2-24: REQUIREMENT TO NOTIFY HUD OF CHANGES SUBSEQUENT TO APPROVAL (08/06)
A mortgagee must notify the Department in writing within a specific number of days of any business changethat affects its standing as an approved institution, or which changes the information on which it was originallyapproved, including: . . .merger, consolidation, succession, liquidation, termination; ora change in its charter provisions, name, bylaws, location, ownership, character of business, or seniorofficers; or a significant reduction in its revenues, assets or net worth.
If a company changes the senior officers and it does not notify HUD and if HUD audits the company, it can makethe corporation indemnify all loans from the date of change. For those of you familiar with First Source that wepublished earlier, HUD can even chase the company officers and loan officers individually as they did in FirstSource.
When must the changes be reported?
* 6-1: REPORTING BUSINESS CHANGES (08/06)
A mortgagee is required to notify the Department within a specified number of business days of any businesschange that affects its standing as an approved institution, or which changes the information on which it was originallyapproved. * * * Change of senior officers or shareholders - Notify HUD within 10 days.
* 6-11: CHANGE OF SENIOR OFFICER (08/06)
If a mortgagee has an addition or substitution of a principal, including but not limited to chairman of theboard, president, vice president, director, or LLC member, the mortgagee must notify HUD of the change.
* 6-13: CHANGE OF SHAREHOLDER, OWNERSHIP, OR CONTROL (08/06)
Whenever an individual or entity, that previously owned less than 25 percent of voting stock of a mortgagee,acquires voting stock resulting in ownership of 25 percent or more, the mortgagee must notify HUD.
MORAL
This is an abbreviated summary. Basically if you change ownership via stock or change senior officers of thecorporation or LLC, HUD is to be notified. Failure to do so can leave you subject to personal liability.
CONTRARY TO POPULAR OPINION HUD/RESPA HAS TAKEN THE POSITION THAT LOAN MODIFICATIONS ARE SUBJECTTO RESPA AND IN PARTICULAR SECTION 8 (ANTI-KICK BACK RULE)
FACTS
The California Department of Real Estate has been advised by the Department of Housing and Urban Developmentthat referral fees paid or received in a loan modification transaction would constitute a violation of the RealEstate Settlement Procedures Act. HUD can be contacted at (202) 708-0502 for more information on referral fees.(DREBul. Winter 2008)
MORAL
We are happy to defend you in either place should you disagree with the above.
FAIR CREDIT REPORTING ACT PREVENTS PRIVATE LAWSUIT WHEN THE FURNISHER OF CREDIT TO THE CREDITREPORTING AGENCY IS WRONG
FACTS
Plaintiff Rebecca Liceaga was the victim of identity theft and filed a complaint against Debt Recovery SolutionsLLC, a collection agency, for damages that she claims were caused when it furnished to a consumer credit reportingagency information about her which it knew or should have known was inaccurate. After her car and purse were stolen,her identity was used to obtain a Sprint cell phone account. Although plaintiff had never done any business withSprint, when the identity thief failed to pay the account, Sprint assigned the debt to defendant, a debt collectionagency, which began "dunning" plaintiff. Despite her pleas to the agency that she was a victim of identitytheft and had no Sprint account, they appear to have disbelieved her and ultimately reported her "default"to several credit reporting agencies, without advising that the debt was contested, thus harming her credit scoreand damaging her credit reputation. This action followed.
The complaint alleged a violation of California's Consumer Credit Reporting Agencies Act, Civil Code section1785.1 et seq. (CCRAA). The trial court granted defendant's motion for judgment upon the pleadings upon the groundthat any private right of action provided by the CCRAA is preempted by the corresponding federal Fair CreditReporting Act (15 U.S.C. § 1681 et seq.) (FCRA)). Plaintiff appealed.
The California 1st Appellate District Circuit Court of Appeal said affirmed. The FCRA preemptsprivate rights of action as to "furnishers" of wrongful information. The actions under the CCRAA arepreempted, without exception, by FCRA. "On its face, the FCRA precludes all state statutory or common lawcauses of action that would impose any 'requirement or prohibition' on the furnishers of credit information. Becauseplaintiffs' state claims are based on alleged injury arising purely from the reporting of credit information bya furnisher of credit, they are completely preempted." (Liceaga v. Debt Recovery Solutions, A120277, 1stApp. Dist. Div 1, 12-29-08)
MORAL
This means a debt collection agency can deliberately report bad credit on someone, knowing that I am wrong andthere is nothing the individual person can do about it under California or Federal law. Only the law enforcementor public agencies can chase me and we know the likelihood of that happening is remote at best.
ARIZONA MAN INDICTED FOR LOAN MODIFICATION FRAUD
FACTS
On Dec. 31, 2008 Attorney General Terry Goddard announced that Bobby John Herrera of Glendale, Ariz., hasbeen indicted on one count of fraudulent schemes and artifices, one count of money laundering, one count of illegalcontrol of an enterprise and five counts of theft. The charges, all felonies, relate to a mortgage assistance scamHerrera allegedly orchestrated, victimizing at least 10 Valley homeowners facing foreclosure.
According to investigators, Herrera solicited struggling homeowners with fraudulent claims that he could modifymortgage terms or provide other assistance to help them prevent foreclosure. Herrera allegedly claimed to have"connections" and expertise negotiating with mortgage lenders to reduce consumers' monthly payments andprevent foreclosure. In exchange for the services he claimed to provide, investigators said Herrera often chargedthe victims upfront fees of $1,245.
In fact, Herrera is alleged to have not provided any such mortgage loan modification or foreclosure relief assistance,using the money instead for personal expenses. "As the number of homeowners facing foreclosure has climbed,so has the number of scam artists seeking to exploit their financial hardship," Goddard said. "Wewill aggressively pursue and prosecute anyone who sees struggling homeowners as good targets for fraud."
The Attorney General's Office began receiving complaints about Herrera on Dec. 3. In response to theconcerns raised in complaints, the Office initiated a criminal investigation into Herrera's activities. The criminalinvestigation into this case involved the Arizona Attorney General's Office, Surprise Police Department and PeoriaPolice Department. Assistant Attorney General Andrei Cherny is prosecuting this case in Maricopa County SuperiorCourt. Herrera was arrested Dec. 30, 2008 by the Peoria Police Department.
In addition to the victims Herrera is charged with defrauding in this indictment, dozens of potential victimshave approached the Attorney General's Office with similar complaints. (AGAZPR123108)
MORAL
NOTE: From start of first complaint until arrest was a total of 27 days. I would say that is pretty fastwork. Hurray for the Attorney General's office for getting an unlicensed person off the street. If you believeyou know of someone that has been the victim of this type of fraud, you can have them contact the Attorney General'sOffice in Phoenix at 602.542.5763; in Tucson at 520.628.6504; or outside the Phoenix and Tucson metro areas at1.800.352.8431. To file a complaint in person, the Attorney General's Office has 37 satellite offices throughoutthe state with volunteers available to help. Locations and hours of operation are posted on the Attorney General'sWeb site. Consumers can also file complaints online by visiting the Attorney General's Web site at
CALIFORNIA OWNER'S BROKER ALLEGEDLY FALSIFIES NOTARIZATION ON TWO PROPERTIES THAT ARE SOLDAND OWNER RECOVERS ONLY $120,000?
FACTS
Plaintiff Zadourian was the true and rightful owner of two real properties located at 1373 Madero Circle, PalmSprings, California and 2851 E. San Juan Road, Palm Springs, California. In April 2006, unbeknownst to plaintiff,broker and agent Caroline Daniel allegedly sold the Madero property to defendant Meloyan without the knowledge,agreement or consent of plaintiff who is the true and rightful owner of the property. Plaintiff received no considerationfor this transaction. Plaintiff at no time received any consideration for the sale. Plaintiff did not sign anycontract, escrow instruction for the sale and did not sign any grant deed.
In July 2006 broker and agent Caroline Daniel allegedly sold the second property to defendant Likhliuyan withoutthe knowledge or agreement of plaintiff. Plaintiff again received no consideration for this sale. Plaintiff didnot sign any contract, escrow instruction or grant deed related to this sale. Daniel allegedly notarized deedsof trust related to the sale that purportedly had plaintiffs' signature and which Daniels knew were not the signaturesof plaintiff. Fidelity Title was the escrow and Title Company for both transactions. Plaintiff sued for quiet title,injunction, fraud, rescission and negligence contending that defendants duped plaintiff and took his two propertieswithout paying any consideration to plaintiff except for the payoff on the existing liens at the time. Plaintiffalso alleged Daniels notarized all transfer documents allowing some third party to purport to be plaintiff whenDaniels had firsthand knowledge that plaintiff was not the person whose signature was being notarized. Defendantpurchasers were both in default on the new purchase mortgages with one having been foreclosed upon.
Fidelity denied liability. The case settled for $120,000 paid by the lender defendants and their insurer,Fidelity in exchange for plaintiff dropping the claim that the deeds of trust were invalid and the transfer ofall rights against the nonsettling defendants. (Zadourian v. Fidelity National Title, et al./ ECoff523, GlendaleSup. Ct., 8/25/08, V&S, 10/10/08, p.9)
MORAL
This is in the form of a question. If the grant deeds were forged then no title was conveyed and both propertiesshould go back to plaintiff with plaintiffs only liabilities being to repay the plaintiff unpaid mortgages thatwere paid off at the purported sale. So why did plaintiff settle for only $120,000? Unless of course, the propertyvalues had so badly decreased that they were not worthwhile taking back.
SAN DIEGO MAN PLEADS NOT GUILTY TO GRAND THEFT INVOLVING A REAL ESTATE SCAM
FACTS
Larry Smith was accused of participating in a real estate scheme that defrauded San Diego County homeownersout of more than $100,000. He pleaded not guilty on Dec. 31, 2008 to felony charges. He faces multiple counts includinggrand theft, conspiracy to commit grand theft and engaging in deceitful practices while acting as a mortgageforeclosure consultant. San Diego Superior Court Judge David Szumowski set Smith's bail at $3 million.If convicted, he faces a possible sentence of 37 years to life under the state's three-strikes law, prosecutorssaid.
Five other suspects have been identified in the case, though only one of them, Margarita CapistranoGaviola, has been arrested. She was to be arraigned on Jan. 2, 2009.
According to court documents, sometime after January 2007, Smith started offering "land patents"to people who had defaulted on their mortgage payments or feared they would soon default. At meetings offeredin offices and storefronts around the county, Smith told homeowners that buying land patents would prevent foreclosurebecause the banks would only own the homes, not the land underneath them.
Smith was convicted of second-degree murder in Los Angeles County in 1968. He also has robbery andassault convictions dating back to the 1970s and '80s, according to the documents.
Deputy District Attorney Marlene Coyne is alleged to have said after the hearing on Dec. 31, 2008 that investigatorshave identified 17 homeowners who say they lost money in the real estate scheme. She said the investigation isongoing. (sduntrib1109)
MORAL
Remember, everyone is innocent until proven guilty in a court of law but that is an expensive process. Nicefellow Mr. Smith if all the above is true. Do you know him?
KANSAS CITY, KANSAS MAN AND OTHERS FOUND GUILTY OF $5 MILLION MORTGAGE FRAUD-GOVERNMENT SEEKSTO FORFEIT PROPERTY
FACTS
A Kansas City builder and two business associates have been convicted on federal charges of conspiracy, bankfraud, and money laundering in a $5 million mortgage fraud scheme,
The trial, which is the first of two trials developer F. Jeffrey Miller faces in federal court in Topeka,began Nov. 17, 2008 with the jury returned the following verdicts on Dec. 18, 2008:
F. Jeffrey Miller, Stanley, Kan.: Guilty on count 1 (conspiracy), count 5 (unlawful monetary transactions),count 9 (criminal contempt), and count 10 (criminal contempt).
Stephen W. Vanatta, Lenexa, Kan.: Guilty on count 1 (conspiracy), count 2 (bank fraud), count 4 (unlawfulmonetary transactions), count 5 (unlawful monetary transactions), count 9 (criminal contempt), and count 10 (criminalcontempt).
Hallie Irvin, Lenexa, Kan.: Guilty on count 1 (conspiracy), count 2 (bank fraud), count 4 (unlawful monetarytransactions), count 5 (unlawful monetary transactions), count 9 (criminal contempt), and count 10 (criminal contempt).
Sandra Joy Harris, Overland Park, Kan., was acquitted on all counts. A fifth defendant in the case, JamesSparks, Lawson, Mo., already pleaded guilty in September 2008. He is scheduled for sentencing Jan. 12, 2009.
The government is seeking the forfeiture of $5 million it alleges the conspirators obtained as a result ofthe fraud. That phase of the trial is set for Jan. 20 and Jan. 21, 2009.
Miller still faces federal charges of conspiracy, bank fraud and money laundering in a related case. Co-defendantsin that case are Todd Earnshaw, Brian Rouse, Angela Parenza, Elizabeth Hessel, James Moser, Steve Middleton,Lanny Ross and Judy Brumble. Five of those defendants - Ross, Brumble, Middleton, Parenza and Hessel - haveentered guilty pleas and are awaiting sentencing. As in any criminal case, a person is presumed innocent untiland unless proven guilty. The outstanding indictment merely contains allegations of criminal conduct. Miller, abuilding contractor in Kansas, Missouri and other states, sold homes under the name of Miller Enterprises, StarLand and Development, Dutch Custom Homes and other companies. He first was indicted May 17, 2006, alongwith eight other people on charges of conspiracy to commit bank fraud and money laundering. The governmentsought the forfeiture of more than $25 million in proceeds from the alleged fraud. In the May 2006 indictment,Miller and the conspirators were accused of targeting home-buyers with poor credit, obtaining inflated appraisals,submitting false information to lenders, and manipulating home buyers to move into homes before closing and thenincreasing the purchase price at closing when buyers were under pressure to accept the terms for fear of losingtheir homes.
After he was indicted, Miller was released on his own recognizance pending trial. He was allowed to continuedoing business under an arrangement in which he agreed to abide by all federal, state and local laws and to permithis business transactions to be monitored by Meara King & Company of Kansas City.
During the trial leading to Thursday's verdict, prosecutors presented evidence that Miller's illegal activitiesdid not stop with his indictment in May 2006. Evidence showed Miller, Vanatta, Irvin and Harris participatedin a conspiracy to obtain mortgages from federally insured lenders by submitting fraudulent information. The conspiratorswere responsible for 29 fraudulent loans totaling more than $5 million. Miller knew when he signed a monitoringagreement that he was in fact continuing to engage in criminal conduct through a new conspiracy with Stephen Vanetta,Hallie Irvin, James Sparks and others.
Miller induced Vanatta and Irvin to cooperate in the conspiracy, Miller agreed to cosign a note to allow Vanettaand Irvin to buy a property at 415 Regency Cove, Lake Ozark, Mo. Miller agreed with Vanatta and Irvin that theywould use part of the money to purchase from him a 1998, 45-foot Sea Ray boat known as "Bling Bling."The conspirators knew that Vanatta and Irvin could not provide a legitimate history of assets and income to qualifyfor the loan. They created and presented false documents to obtain the loan from First National Bank, Lake Ozark,Mo.
Miller, Vanatta and Irvin ran an office at 10777 Barkley, Overland Park, Kan., where they marketed homesunder the names Miller Enterprises, Dutch Custom Homes, Star Land and Development and Somerset Homes. Theycreated advertisements soliciting home buyers with credit problems, promising no money down and financing by thebuilder.
James Sparks was a loan broker in the greater Kansas City area who referred homebuyers by Miller, Vanattaand Irvin. He collaborated with Miller, Vanatta and Irvin by knowingly preparing and submitting false financialinformation for home buyers who were applying for loans from federally insured lenders. Sparks paid kickbacks toIrvin on behalf of Vanatta of 40% of loan closings to maintain business with Miller Enterprises. He provided downpayments to home buyers and referred falsified and inflated sales contracts to appraisers selected by Vanatta knowingthat they would inflate appraisals to cover altered sales prices.
Sentencing is set for May 4, 2009. The defendants face the following penalties:
* Conspiracy: A maximum penalty of 30 years in federal prison and a fine up to $250,000.
* Bank fraud: A maximum penalty of 30 years and a fine up to $1 million on each count.
* Unlawful monetary transactions: A maximum penalty of 10 years and a fine up to $250,000.
* Criminal contempt: A maximum penalty of five years and a fine at the court's discretion. (usattks121908)
MORAL
First they get indicted. Then while out on bail they continue to do more mortgage fraud which gets found outand creates the second indictment. These guys are going to go away for a long time. Further yet with the governmentseeking forfeiture of their property it is unlikely they will have anything left when they start their prison sentence.
SOUTH DAKOTA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Benjamin Ashley Markham, of Sioux Falls, appeared before US Magistrate Judge John E. Simko and pled guiltyto two counts of an indictment that charged him with bank fraud and fraudulent use of a social security number.The maximum penalty upon conviction of the bank fraud offense is 30 years in prison and/or a $1 million fine.The social security offense carries a penalty upon conviction of five years in prison and/or a $250,000 fine. Markhamfilled out an application for a mortgage loan with First Premier Bank in Sioux Falls in June 2008. In doing so,he used a Social Security number belonging to another person and also provided the bank with false informationregarding his employment. The investigation was conducted by the Sioux Falls Police Department and the FederalBureau of Investigation. The case is being prosecuted by Assistant United States Attorney Kevin Koliner. A pre-sentenceinvestigation was ordered and a sentencing date will be set. The defendant was released on bond pending sentencing.(usattysd121708)
MORAL
I think, as a friend of mine named S. Guy Puccio likes to say, that this is "felony stupid." He useshis real name with someone else's Social Security number to a bank and does not expect the bank to notice the discrepancywhen it pulls the credit report?
FEDERAL TRADE COMMISSION SAYS FALSE CREDIT REPAIR REPRESENTATIONS POTENTIALLY COST COMPANYAND THE OWNER $210,000
FACTS
A credit repair company, Payneless Credit Repair LLC, and its owner, Lesley L. Payne, both located inRichardson, Texas, which allegedly lured consumers with false claims for credit repair services and requiredadvance payment ranging from $500 to as much as $2,500, has agreed to settle Federal Trade Commission chargesthat it violated federal law.
The proposed settlement bars the defendants from making deceptive claims when marketing any product or service,including credit repair services. The settlement also bars them from violating the Credit Repair OrganizationsAct and specifically prohibits the defendants from: (1) claiming that a credit repair organization can permanentlyremove negative information from consumers' credit reports, even when the information is accurate and not obsolete;(2) requiring advance payment for credit repair services; (3) failing to provide a written statement of "ConsumerCredit File Rights Under State and Federal Law" before any agreement is signed; (4) failing to include intheir contract conspicuous statements about the consumer's right to cancel without penalty or obligation withinthree business days; and (5) failing to provide a written "Notice of Cancellation" for consumers to usewhen exercising their cancellation rights.
The settlement bars the defendants from collecting money from consumers who purchased services from the defendantsbefore July 10, 2008, and from disclosing or benefiting from customers' personally identifiable or financial information.The defendants are also prohibited from violating the Fair Credit Practices Act and the FTC's Disposal Ruleby failing to take reasonable measures to protect consumers' personally identifiable information during its disposal.
The settlement imposes a judgment for consumer redress of $210,000, which is suspended due to the defendants'inability to pay. The full judgment will be imposed if the defendants are found to have misrepresented theirfinancial condition. The settlement also contains record-keeping provisions to allow the FTC to monitor compliancewith the order.
The order was filed in the U.S. District Court for the Northern District of Texas, Dallas Division, on December22, 2008. NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission bythe defendants of a law violation. A stipulated final order requires approval by the court and has the force oflaw when signed by the judge.
To file a complaint in English or Spanish, visit the FTC's online
MORAL
The only fallacy in this argument is when you press a button to even get more information there is a hang-upor disconnect if they figure out whose phone number it is or if you try to report and caller ID still does notwork for the "bad guys." Only the "good guys" get nailed generally.
OPTING OUT OF THE FEDERAL TRADE COMMISSION RULE ON PRERECORDED TELEPHONE CALLS OR "HOWTHE DO NOT CALL LIST DOES NOT WORK"
FACTS
Effective Dec. 1, 2008, any telemarketing call that delivers a prerecorded message must include aquick and easy way to opt-out of receiving future calls. The opt-out must work both for consumers who answerthese calls in person and for those whose answering machines or voice mail services receive the calls.
Prerecorded telemarketing messages are permitted only in limited circumstances - only when the callerhas an established business relationship with the consumer being called. Under Do Not Call amendments adoptedin August 2008 effective Dec. 1, 2008, any permitted prerecorded message must provide the called consumer withan interactive means to opt out of receiving future calls from the seller or fundraiser using the prerecordedmessage. The consumer must be able to opt out at any time while the message is playing by pressing a particularnumber or speaking a particular word. Once the consumer has opted out, his or her phone number must be automaticallyadded to the in-house Do Not Call list of the calling seller or fundraiser. Then the call immediately must be disconnectedso that the consumer's line is cleared.
If the prerecorded telemarketing message is left on an answering machine or voice mail service, it must includea toll-free opt-out number that, when called, also connects to an automated voice or key press opt-out mechanism.This will allow consumers to opt out at any hour of the day or night when they retrieve the message, without havingto wait until the next business day to call.
All recorded telemarketing calls subject to the Commission's Telemarketing Sales Rule must comply with thenew requirements, including calls to solicit sales of goods or services and calls placed by telemarketersto solicit charitable donations. Some calls delivering prerecorded messages (such as political calls, bonafide market survey calls, and calls made in-house by banks or telephone companies) are not covered by the new requirement,however, because the Commission lacks the legal authority to regulate them. In addition, prerecorded healthcaremessages covered by the Health Insurance Portability and Accountability Act of 1996 are exempt from the new requirement.
The automated opt-out requirement is the first of two measures provided by the recent TSR amendment to protectconsumers' privacy at home. The second measure prohibits telemarketing calls that deliver prerecorded messagesto anyone who has not agreed in advance to receive such calls. But until Sept. 1, 2009, sellers may continueto use prerecorded messages in calling consumers with whom they have an established business relationship. AfterSept. 1, 2009, sellers may use prerecorded messages only in calls to consumers who have expressly agreedin advance to receive them.
THE INFORMATION HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
