HUD CHANGES RULES WHEN SEEKING PENALTIES AGAINST MORTGAGE BROKERS AND LENDERS
FACTS
This rule revises the definitions of "material or materially" and adds a definition of "ability to pay," which is one factor used in determining the appropriateness of the amount of any civil money penalty. Additionally, this rule requires respondents, in their response to the prepenalty notice, to specifically address the factors used in determining the appropriateness and amount of civil money penalty. This rule also allows government counsel to file complaints on behalf of the Mortgagee Review Board and departmental officials.
In simpler language if you are going to contest a HUD complaint you have 15 days from the date served to request a hearing, 30 days from date of service to file a response and if you are going to raise inability to pay a penalty or a limited ability it must be raised in your response. 24cfrpart30)
MORAL
Note the rules well. Failure to comply with the rules can cause you to lose your case. Remember, HUD is seeking penalties against individual brokers, loan officers and corporate officers.
GOOD NEWS AS SALES OF EXISTING HOMES INCREASE
FACTS
The National Association of Realtors reports that sales of existing homes rose 6.5% to an annual rate of 4.74 million in December. Buyers -- aware of the lower prices, especially in California, Florida and Nevada, where foreclosures have swamped the market -- are taking advantage. The nationwide median sales price plunged to $175,400, down from $207,000 a year ago. (ascent.com12609)
MORAL
Go find the investors and do purchase money loans.
FORECLOSURES FOR 2008 WERE HORRIFIC
FACTS
More than 2.3 million homeowners faced foreclosure in 2008. More than 860,000 properties nationwide were actually repossessed by lenders in 2008. Of this, 236,000 were in California. Nevada, Florida, Arizona and California had the highest foreclosure rates in 2008. (ascent.com12809,lat12809))
MORAL
I would suggest you now know where to find bargains in housing. Especially when you consider that 50 states had more than 860,000 foreclosures and California has the dubious distinction of having more than 27% of the foreclosures.
BANKRUPTCY AND THE "MEANS" TEST
FACTS
Some of you have requested information on Chapter 7 bankruptcy (discharge of all debts not specifically excluded by code) and the "means test." The means test involves looking at the debtor's current monthly income to determine if he or she is eligible to discharge all their debts such as credit cards, cars, installment debts, loans, etc. It has a very specific meaning.
CMI is a component of a statutory means test that bankruptcy courts use to determine whether a debtor's bankruptcy petition is to be presumed an abuse of Chapter 7. See 11 U.S.C. § 707(b)(2). The means test is applied only if the debtor's CMI is above the safe harbor amount set forth in 11 U.S.C. § 707(b)(7). If the debtor's CMI minus certain expenses specified in the Internal Revenue Service's collection standards multiplied by 60 is either (1) greater than or equal to $6,575 or 25% of the debtor's nonpriority secured debts, whichever is greater, or (2) greater than or equal to $10,950, then the case is presumed to be an abuse and the bankruptcy court may either dismiss it under § 707(b) or, with the debtor's consent, convert it to Chapter 13. §§ 707(b)(2)(A), (b)(1). (blausey v. trustee 9th cir. No. 07-15955,12309)
MORAL
What does this mean to you? It means the formula used by the bankruptcy court is somewhat complicated and software is used to compute it. The initial interview with a person considering bankruptcy is free. So if they would like to meet with our bankruptcy attorney have the person call for an appointment. As usual, it is confidential and privileged by law.
COMPANIES STILL WANT TO VIOLATE THE "DO NOT CALL" LAW AND GET "NAILED"
FACTS
Westgate Resorts, of Orlando, Fla., was named in a complaint filed on behalf of the Federal Trade Commission. The agency alleged that Westgate and two other companies placed thousands of telemarketing calls to people on the list. The FTC says Westgate has agreed to pay $900,000 to settle the charges.
The FTC also announced a $275,000 settlement with another Florida-based travel company, Accumen Management Services Inc., and its subsidiary, All in One Vacation Club LLC. The company made telemarketing calls to consumers who had filled out entry forms for a sweepstakes to win vacation packages. Many of those called, the FTC said, were on the Do Not Call registry and did not agree to receive the telemarketing pitches for timeshares and vacation getaways.
In the case of Westgate, the agency received several thousand complaints from consumers. The commission said Westgate bought phone numbers from an Internet-based lead generator that collected contact information in connection with offerings on its Brandarama.com web site. The two other companies named in the Westgate complaint are: Central Florida Investments Inc., and CFI Sales and Marketing LLC, which both did telemarketing for Westgate.
The combined fines of $1.17 million will go to the U.S. Treasury.
The latest enforcement actions bring to 40 the number of Do Not Call cases the government has filed against companies since the registry began in June 2003. The biggest case to date involved satellite television provider DirecTV Inc., which paid a $5.3 million settlement.
More than 167 million phone numbers have been placed on the Do Not Call registry. (ascent.com12809)
MORAL
Only 40, in five years! No wonder we still get the unwanted calls. I get at least three or four nightly.
IN ARIZONA PAY YOUR APPRAISER OR RISK LOSING YOUR MORTGAGE LICENSE
FACTS
In May 2007 an appraiser filed a complaint with the Arizona Department of Financial Institutions that MMCR Mortgage LLC of Phoenix did not pay him for 16 appraisals totaling $4,350.00. In the same month DFI sent a letter to the responsible individual requesting a reply to the complaint within 10 days. Not having received a response, DFI sent a second letter in June reminding MMCR of the nonresponse and again asking for a response to the appraiser's complaint. In July 2007 DFI sent yet a third letter demanding an immediate response. In August DFI received a response stating the loan officer that ordered the appraisals did not adhere to company policy but MMCR would look into the matter. A copy of this was sent to the appraiser who stated he knew nothing about the company policy and expected to be paid in full. DFI mailed this to MMCR in August 2008 and requested a written response and did not receive one. DFI in October 2008 then filed a disciplinary proceeding against MMCR. Regulators found MMCR failed to respond to the superintendent while conducting an investigation and failed to pay a third party in a mortgage related transaction.
The stipulated settlement was: MMCR agreed to pay the $4,350 to Phoenix Appraisal Service; pay a $1,000 civil money penalty to DFI and lastly provide a complete response to the DFI letter sent to it in August of 2008. (o9f-bf048-bnk,12009)
MORAL
I do not know who told whom to do what, but I do know you should never, ever ignore a government agency of any kind. They are like bulldogs. Once they take a bite, they never let go until their appetite is satisfied. Now it cost MMCR an extra $1,000 plus they are on the discipline sheet of DFI.
VARIOUS WAYS TO STOP AND OR UNDO A FORECLOSURE SALE IN CALIFORNIA
FACTS
QLS instituted non-judicial foreclosure proceedings, commencing with the recordation of a Notice of Default. QLS was not the trustee named in the deed of trust, and so was required to record a Substitution of Trustee pursuant to Civil Code section 2934a. This it neglected to do. Pursuant to a recorded Notice of Trustee Sale, QLS sold the Property to the highest bidder, Pro Value, on June 9, 2005 for $842,000. QLS issued a Trustee's Deed of Sale to Pro Value, which was subsequently recorded.
Some time thereafter, QLS and FV-1, the beneficiary under the Deed of Trust, realized that there was no recorded Substitution of Trustee naming QLS as trustee. Consequently, both QLS and FV-1 determined that the Trustee's Deed of Sale was void.
A nonjudicial foreclosure sale is a creature of statute. The California Civil Code contains a comprehensive statutory scheme regulating nonjudicial foreclosure. The trustee's role in preparing for and conducting the sale is set forth in detail in Civil Code section 2924 et. seq. The trustee in nonjudicial foreclosure is not a true trustee with fiduciary duties, but rather a common agent for the trustor and beneficiary. The scope and nature of the trustee's duties are exclusively defined by the deed of trust and the governing statutes. No other common law duties exist. In short, the trustee does not contract with the purchaser for the sale of the foreclosed property, but performs ministerial acts which, when properly executed, result in the transfer of title to the purchaser.
Here, the trustee did not properly execute the ministerial acts set forth by statute. This statutory violation resulted in a void sale, which required QLS as trustee to return the purchase price, with interest. Pro value properties inc vs. quality loan service corp., No. B204853. Second Dist., Div. Five. Jan. 23, 2009)
MORAL
Remember, in an earlier e-alert I cited cases that stated without proof of the assignment of the deed of trust the alleged assignee would have trouble foreclosing. Now you add to it that the failure to legally substitute trustees makes the foreclosure void as opposed to voidable and that creates a problem with title. Therefore, how can the borrower be evicted in a subsequent unlawful detainer? Interesting thoughts, are they not?
MINNESOTA MAN DRAWS 81 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Jan. 28, 2009, John M. Rubischko, of Eagan, Minn., was sentenced to 87 months in federal prison and five years supervised release on one count of wire fraud and one count of aggravated identity theft in connection with a mortgage fraud scheme resulting in losses of more than $1 million.
Rubischko was a mortgage broker who owned and operated licensed mortgage broker businesses, including Family First Mortgage, All Fund Mortgage and MortgageBanc.us. From January 2003 through June 2007, Rubischko devised a scheme to defraud and obtain money by means of false and fraudulent pretenses. With the assistance of financial institution employees, Rubischko used the identities and personal information of other individuals, without their knowledge or authorization, to obtain approximately $1.8 million in bank loans, bank credit and mortgages. Rubischko used the funds from these transactions to purchase residences and personal property.
Rubischko directed bank employees to notarize forged documents, create false documents, misapply funds from bank loans and credit transactions for his benefit, and conceal the transactions from the individuals whose identities he had used. Rubischko paid the bank employees for these fraudulent actions. According to the plea, Rubischko used his elderly mother's name to purchase a Prior Lake property. (usattmi12809)
MORAL
Please note the federal government went back to mortgages that took place six years ago. Do you know anyone that did questionable loans six years ago? It must give Rubischko a nice feeling to know he took his elderly mother's identity!
NEW YORK ATTORNEY GENERAL SETTLES WITH TWO MORTGAGE COMPANIES FOR DISCRIMINATORY PRICING OF MORTGAGES
FACTS
On January 5, 2009 Attorney General Andrew M. Cuomo announced the results of an investigation with the New York State Department of Banking into discriminatory practices in the mortgage brokerage industry. Two mortgage brokerage companies - HCI Mortgage and Consumer One Mortgage - will collectively pay $665,000 in restitution to approximately 455 Black and Latino borrowers who were illegally charged higher fees than similarly situated White borrowers. The companies collectively operate more than 20 branches throughout New York State. The Attorney General also filed a lawsuit in federal district court against another mortgage brokerage company - U.S. Capital Funding LLC - that allegedly engaged in similar discriminatory practices.
The Attorney General's office, the New York State Banking Department and fair lending experts, conducted statistical analyses of loans arranged by HCI Mortgage and Consumer One that included charges for yield spread premiums and origination fees. The office concluded that, on average, Black and Latino borrowers were charged several thousand dollars more in up-front fees than White borrowers. The Attorney General's investigation found that Latino borrowers who received a single home mortgage loan through HCI Mortgage paid on average 55% more in fees, or about $2,680, than White customers. African-American borrowers who received a single home mortgage loan were charged about 46% more in fees than White customers, or $2260. These disparities could not be explained by borrower, property, or loan characteristics that might impact the amount of time HCI Mortgage or Consumer One took to arrange loans, such as the borrower's credit score or the loan amount.
The agreements require the companies to:
* Pay $665,000 into a fund to provide restitution to certain Black and Latino customers who received loans from January 2005 through July 2007. Any funds remaining after restitution is paid will be distributed to not-for-profit corporations or organizations to provide consumer financial education or assistance to homeowners facing foreclosure in New York.
* Adopt a standard fee schedule that will be disclosed to borrowers and must be followed unless exceptional circumstances exist.
* Internally monitor and analyze the imposition of fees to ensure that Black and Latino borrowers are treated fairly and equally.
* Provide detailed reports to the Attorney General's office to ensure compliance with the agreement.
* The Attorney General's office conducted a similar investigation of U.S. Capital Funding and is alleging that the company also had violated fair lending laws by charging much higher fees to Black and Latino borrowers. Because the company failed to agree to provide appropriate relief to victims, the Attorney General filed a lawsuit seeking restitution for over 100 minority borrowers and a court order requiring the company to cease its discriminatory practices.
The lawsuit alleges that from January 2006 through July 2007, U.S. Capital Funding served as a mortgage broker for approximately 300 home mortgage loans in New York, including about 135 loans made to Black and Latino borrowers. The lawsuit asserts that the company violated federal and state law by charging Black and Latino borrowers who received a single home mortgage loan on average 58 percent more in fees than White borrowers, resulting in an additional charge of about $3,500. These investigations were triggered by evidence revealed during the Attorney General's earlier probe into discriminatory lending practices by GreenPoint Mortgage Funding, Inc. HCI Mortgage, Consumer One, and U.S. Capital Funding all did substantial business with GreenPoint. (nyattygen1509)
MORAL
I wonder if any of these companies heard of the "Tiered Pricing Rule" that HUD uses. It is for exactly the same purpose and as you can see easy to prove but requires going through a lot of paper.
OHIO ATTORNEY GENERAL SUES BROKER FOR SO MANY VIOLATIONS IT IS HARD TO KNOW WHERE TO BEGIN
FACTS
Prime Option Financial Services, LLC, a Cleveland-area mortgage broker, allegedly failed to give consumers all the information they needed about their new loans, according to a lawsuit filed in Cuyahoga County Common Pleas Court by Ohio Attorney General Richard Cordray. The suit charges Prime Option and Mark Belter, its leader, with several violations of consumer protection laws for allegedly failing to provide required information to consumers signing home mortgage loans.
According to the Attorney General, Prime Option was a mortgage broker company located in Westlake, Ohio. In October 2007, the company stopped doing business and surrendered its mortgage broker licenses. Mark Belter is listed as the president and owner on various documents.
An Attorney General investigation of residential mortgage loans brokered by Prime Option found that almost every loan reviewed had missing or incomplete documents. For example, the following required documents often were found to be missing or incomplete: Mortgage Loan Origination Disclosure Statements, which disclose fees paid to the broker; escrow disclosure forms, which estimate the monthly cost of a loan; and Ohio Homebuyers' Protection Act Informational Documents, which explain consumers' rights.
The investigation also found that Prime Option failed to store or dispose of business records containing consumer information as required by the federal Gramm-Leach-Bliley Act, which is designed to protect personal financial information and prevent identity theft.
The lawsuit charges Prime Option and Mark Belter with violating the federal Real Estate Settlement Procedures Act and the Ohio Consumer Sales Practices Act. In the suit, Attorney General Cordray asks the court to prohibit the company from committing further violations of the law, to reimburse consumers who lost money, and to pay civil penalties. (ot12809)
MORAL
Out of business in 2007. Sued personally in 2009. I trust Mr. Belter has enough money to pay if he loses.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
