HUD/FHA RESCINDS PARAGRAPH 4-9 OF THE MORTGAGEE APPROVAL HANDBOOK
FACTS
In order to maintain your status as an FHA-approved mortgagee, you are required, among other things, to timely file annual audited financial statements, sign and submit a yearly verification report and pay your annual fee for the main and registered branch offices.
The Department considers the timely annual renewal of FHA approval requirements to be critical. A mortgagee's failure to renew its FHA-approval in a timely manner has caused significant expenditures of staff time and office resources. Many mortgagees have repeatedly failed to comply with the Department's filing deadlines. HUD is rescinding paragraph 4-9 of HUD Handbook 4060.1, REV-2. HUD is now removing this paragraph from the Handbook. Any failure of a mortgagee or a lender to comply with annual renewal of FHA-approval requirements may be referred to the Mortgagee Review Board for its consideration as provided for in 24 C.F.R. Part 25.
In the past, if a mortgagee failed to meet one or more of these annual renewal requirements, HUD would send that mortgagee a Notice of Violation and the mortgagee was permitted to rectify the violation and enter into a settlement agreement that required the mortgagee to pay a $1,000 fee. This process was explained in HUD Handbook 4060.1, REV-2, paragraph 4-9. HUD will no longer permit mortgagees to settle the matter prior to consideration by the Mortgagee Review Board. The mortgagee may, however, cure the violation, which will be taken into account by the Mortgagee Review Board when it considers the matter.
Mortgagees must now appeal the Notice of Violation in accordance with the regulations at 24 C.F.R. Part 25 and the Mortgagee Review Board will consider the matter. The Mortgagee Review Board may, among other things, impose penalties and/or withdraw the mortgagee's FHA-approval or permit the Department to enter into a settlement agreement. The sanctions available to the Mortgagee Review Board may be found at 24 C.F.R. § 25.5. If a mortgagee's FHA-approval is terminated, that mortgagee may not reapply for FHA approval until 12 months after the effective date of their termination.
The provisions within this Mortgagee Letter are effective immediately. All other FHA guidelines and requirements not superseded by this Mortgagee Letter remain in effect. (ml09-1)
MORAL
If you do not timely file your annual renewal you are looking at potentially losing your FHA approval for at least 12 months. See your attorney now if you are not going to file timely or you may see no FHA loans for 12 months.
INTERNAL REVENUE SERVICE IS WILLING TO SUBORDINATE OR DISCHARGE ITS TAX LIEN TO ALLOW SALE, REFINANCE OR LOAN MODIFICATION
FACTS
In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution's, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage.
To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. Again, there is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for address information.
Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the taxpayer may be unable to complete the home ownership change and the ownership title will remain clouded.
To apply for a tax lien discharge, applicants must follow directions in Publication 783, Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien. There is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235 for address information.
The IRS also urges people to contact the agency's Collection Advisory Group early in the home sale or refinancing process so that it can begin work on their requests. People sometimes delay informing lenders of the tax liens, which only serves to delay the transaction. (IR-2008-141, Dec. 16, 2008)
MORAL
If you have a short sale or loan modification with a junior IRS tax lien, it seems a good idea to contact IRS early on to see if you can work it out. This may make you your commission.
BNC MORTGAGE, LLC FILED CHAPTER 11 BANKRUPTCY
FACTS
BNC Mortgage LLC, a subprime mortgage unit of Lehman Brothers Holdings Inc., filed for bankruptcy protection on Jan. 9, 2009 and plans to wind down operations. BNC filed for Chapter 11 protection from creditors with the U.S. Bankruptcy Court in Manhattan. It has more than $1 billion of both assets and liabilities, and in excess of 100,000 creditors, a court filing shows. BNC asked the bankruptcy court to combine its case with that of another Lehman unit, Luxembourg Residential Properties Loan Finance S.a.r.l., which filed for Chapter 11 protection on Jan. 7, 2009.
The case is In re BNC Mortgage LLC, 09-10137, U.S. Bankruptcy Court, Southern District of New York, in case you would like to see the list of creditors or anything else in the bankruptcy papers. (reuter1909)
MORAL
Do you have any loans in the BNC pipeline? You may want to consider checking on funding or placing the paper elsewhere and notifying your borrowers.
IN CALIFORNIA IF THE LANDLORD DOES NOT HAVE A LEGITIMATE CERTIFICATE OF OCCUPANCY FOR A RENTAL UNIT IT MAY NOT COLLECT RENT FOR ANY REASON
FACTS
Plaintiff Maria de Jesus Lagunas Espinoza owns property rented to defendants Gudelia Calva and Jorge Soqui. The landlord rented the building to tenants under a written lease. Tenants failed to pay the monthly rent of $750 for three months and had been served with a three-day notice to pay $2,250 or vacate the premises. The tenants could prove no certificate of occupancy was issued for the rented unit. The tenants introduced records of the Planning and Building Agency of the City of Santa Ana; they indicated that no occupancy permit had been issued for the rented premises. Copies of applicable city ordinances were also admitted.
The trial court granted judgment in favor of landlord for $2,350 in her action for unlawful detainer against tenants. The Appellate Division affirmed the judgment. The tenants appealed.
The 4th Appellate District of the Court of Appeals said reversed. The absence of certificate of occupancy rendered the lease illegal. Exhibits show that no certificate of occupancy had been issued for the rented building. Evidence further showed that Section 109.1(1) of the Santa Ana municipal code prohibits the use or occupation of a building "until the building official has issued a certificate of occupancy." Thus the occupancy was unlawful and the lease constitutes an illegal contract. The California Supreme Court held in Tri-Q, Inc. v. Sta-Hi Corp. (1965) 63 Cal.2d 199: "There is no doubt that the general rule requires the courts to withhold relief under the terms of an illegal contract or agreement which is violative of public policy. It is also true that...'when the evidence shows that...[a party] in substance seeks to enforce an illegal contract or recover compensation for an illegal act, the court has both the power and duty to ascertain the true facts in order that it may not unwittingly lend its assistance to the consummation or encouragement of what public policy forbids.' These rules are intended to prevent the guilty party from reaping the benefit of his wrongful conduct, or to protect the public from the future consequences of an illegal contract. They do not necessarily apply to both parties to the agreement unless both are truly in pari delicto." Here we cannot assume the tenants were aware of the legal requirements for occupancy and the landlord's failure to meet those requirements. The landlord is not entitled to rent. (Espinoza vs. Calva, G040006, 1/7/09)
MORAL
Build an add-on. Do not obtain a certificate of occupancy. Do not collect rent and pay the tenant's attorney fees for living in your place rent-free.
DENVER REALTOR SENTENCED FOR MORTGAGE FRAUD
FACTS
LaDonna Mullins of LaDonna's Realty & Management was sentenced on Jan. 12, 2009 in the U.S. District Court in Denver for her 2008 conviction on mortgage fraud charges.
District Judge Marcia Krieger said Mullins, 74, will serve three year's probation, with the first 15 months to be spent in home detention. The Realtor also was ordered to forfeit $44,292 gained from the fraud as well as pay restitution of $66,459.
A jury found Mullins guilty in July 2008 on four counts of wire fraud for her part in a complex mortgage fraud scheme. According to evidence presented at her trial, Mullins gave false information about prospective borrowers to mortgage companies that fund federally insured loans, to help the borrowers get home loans.
Mullins found prospective homebuyers who couldn't qualify for mortgages using their true credit history and other financial information. She then helped buyers qualify for mortgages using false Social Security numbers; false W-2s, tax returns and other income documents or falsifying rent and employment verifications.
The case was investigated by the Office of the Inspector General for the
MORAL
There are several things to note here: 1-Age doesn't prevent conviction (she is 74 years old); 2-HUD actively participated in the investigation with the IRS; 3- Mullins forfeits assets from her personal property; and 4-She loses her right to vote for felony conviction, undoubtedly loses her real estate license and will have difficulty finding a decent job in the future. It just is not worth it. Do not commit the fraud.
TWO FLORIDA BANK INSIDERS AND SIX OTHERS INDICTED FOR MORTGAGE FRAUD
FACTS
On Dec. 18, 2008, a federal grand jury returned a five-count indictment charging Bienvenido "Benny" Benach, Jr., Ramon Puentes, Danny Flores, Rolando Alfonso, Jorge Nobrega, Jorge Arrieta, Sebastian Kishinevsky and Adriana Cruz, with a bank fraud scheme that resulted in the approval and disbursement of two home equity loans, totaling approximately $1 million. The indictment alleges the scheme was directed at Bank of America and Wachovia. The defendants have been charged with conspiracy to commit bank fraud, bank fraud, and aggravated identity theft, in violation of Title 18, United States Code, Sections 1349, 1344 and 1028A. All of the defendants have made their initial appearances before a Magistrate Judge and the case will be set for trial by the District Court Judge presiding over the matter.
According to the indictment, Benach, Puentes, Flores and Alfonso decided to submit simultaneous applications for fraudulent home equity lines of credit to Bank of America and Wachovia for the total amount of $1 million, requesting $500,000 from each bank. Each HELOC application listed Benach's mother-in-law as the purported borrower, and a home owned by Benach's mother-in-law as the collateral. To prepare and process the HELOC applications, Benach's mother-in-law's name and social security number were used without her knowledge, input or authority.
Flores and Alfonso submitted the fraudulent Bank of America HELOC application to Arrieta, a personal banker at Bank of America, and gave the fraudulent Wachovia HELOC application to Kishinevsky, a financial specialist at Wachovia. For a fee, each bank insider agreed to process the fraudulent HELOC. At the time of the submission of the fraudulent HELOC applications, neither bank was made aware of the other pending HELOC application. After the HELOC at each bank was funded and the funds were made available, the defendants disbursed and shared the fraudulently obtained loan proceeds, receiving in total approximately $800,000. (usattysdfl122308)
MORAL
I suppose that is one way to get even with a mother-in-law. But she gets the last laugh at sentencing if everyone is found guilty. Remember, they are innocent until proven guilty but mind the legal fees.
TEXAS MAN INDICTED FOR MORTGAGE FRAUD
FACTS
A federal grand jury filed a sealed 19-count indictment against Brent Timothy Baird of McKinney, Texas, on Dec. 10, 2008 in the U.S. Eastern District of Texas court in Sherman. U.S. District Judge Marcia Crone approved a motion to unseal the indictment on Dec. 23, 2008, according to federal court records.
Baird faces 13 counts of wire fraud and six counts of "exceeding authorized access of a computer of a financial institution for purpose of commercial advantage and private person gain" to illegally obtain more than $3.5 million in assets, cash and personal property, according to his indictment.
The court issued a warrant for Baird's arrest on Dec. 18, 2008. The court later issued an order detailing the terms of his release.
Baird ran Baird Management Group in McKinney from approximately February of 2005 to March of 2007. Baird's business attempted to help homeowners who were unable to pay their mortgages by selling their homes to investors and letting them rent the property to the investors.
U.S. attorneys and the McKinney Police Department claimed Baird obtained information on delinquent mortgage holders through employees at Countrywide Mortgage Co. The federal indictment claims Baird made five payments from July of 2005 to May of 2006 to the employees ranging in size from $1,000 to $2,000.
Baird then approached investors with a "mortgage reinstatement program" to buy the delinquent homes and let the residents pay rent to the investors to keep them from losing their houses. The indictment identifies 13 people who made wire transfers to Baird from California, Kansas, Pennsylvania, New York and North Carolina ranging from approximately $12,000 to $41,000 to join the program.
"Baird did not intend to use the money investors sent to him to pay on the home mortgages that were represented to the investors," the indictment read. "Baird used the money instead for his personal benefit and to pay the expenses of BMG. In order to lull investors and make them think they were receiving a return on their investment, Baird used some money received from investors to pay other investors."
Government officials seized $3,514,932 from Baird as part of his indictment that they believe derived from his alleged offenses. (mckincojurgaxstr1809)
MORAL
Seized his money so that he needs a public defender. That should tell you something. Like you do not get to keep the money or what you purchased with it.
FORMER COO OF A VIRGINIA 1031 EXCHANGE CORPORATION AGREES TO 10 YEARS IN A FEDERAL PRISON
FACTS
Former chief operating officer Lara Coleman of Investment Properties of America, based in Richmond, Va., pleaded guilty on Jan. 6, 2009 to conspiring to commit mail and wire fraud and to making a material false statement to federal investigators.
On July 10, 2008, a federal grand jury returned a superseding indictment for her role in a scheme to defraud and obtain millions of dollars in client funds held by the 1031 Tax Group, a qualified intermediary company owned by the same person who owned Investment Properties of America.
Coleman pleaded guilty to one count of the superseding indictment that charged her with conspiracy to commit mail and wire fraud and to a one-count information charging her with making a material false statement to federal investigators. According to the plea agreement and statement of facts, Coleman and others used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include various promises by the qualified intermediaries to clients regarding the safekeeping of exchange funds in trust.
Coleman admitted that 1031TG falsely represented that it would hold client funds solely to complete the clients' 1031 exchanges. Coleman admitted that after obtaining clients' exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds to support the lavish lifestyle of the owner of 1031TG, pay operating expenses for the owner's various companies, invest in commercial real estate and purchase additional qualified intermediary companies to obtain access to additional client funds. In addition, Coleman admitted that she lied to federal investigators about statements that she had made in 2006 to internal attorneys for Investment Properties of America about the amount of money that she and others had misappropriated.
Coleman has agreed to a sentence of 10 years in prison. At sentencing, scheduled for May 1, 2009, she also faces a $500,000 fine. In addition, the indictment seeks forfeiture of all funds and assets owned by Coleman that were derived from or connected to the misappropriation of the approximately $132 million in 1031TG funds.
In related cases, Robert D. Field II and Richard E. Simring have pleaded guilty to participating in the conspiracy to defraud 1031TG customers. Field was the chief financial officer and Simring was the chief legal officer of a holding company that was set up, in part, to oversee both Investment Properties of America and 1031TG, however neither company was ever officially made a subsidiary of the holding company. Both men are also scheduled to be sentenced on May 1, 2009. (usattyedva1609)
MORAL
The government is looking to get all her assets. She agreed to 10 years in prison. Remember in the federal system you have to serve 85% of your time. And she loses all her property? Doesn't seem worth it, does it? Remember what I have been saying lately? The government is chasing your assets to forfeit your property for mortgage fraud.
THE INFORMATION HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
