KEY ELEMENTS OF THE STIMULUS PLAN FOR MORTGAGE BROKERS TO USE FROM A MARKETING POINT OF VIEW
FACTS
A key element of the initiative will allow up to five million borrowers who owe more than their house is worth to refinance through Fannie Mae and Freddie Mac.
That provision will help tens of thousands of homeowners in Arizona have fallen more than 45%.
Homeowners who have mortgages of more than $500,000 are not likely to qualify for aid because Fannie Mae and Freddie Mac will typically guarantee only loans for less than that amount. The housing plan will also assist as many as four million U.S. homeowners facing or already in foreclosure but who still own their homes.
HOMES IN FORECLOSURE
For this group, the federal government will provide matching funds to lenders to lower interest payments on loans. The plan requires that mortgage payments be no more than 31% of monthly incomes.
Lenders can earn $500 for each modified loan that enables a borrower to afford the payment and avoid foreclosure. Borrowers, who stay current on modified mortgage payments, can get up to a $5,000 reduction in the principal they owe.
Without the stimulus plan government estimates show another 6 million U.S. homeowners will go into foreclosure during the next few years. There were 2.2 million houses foreclosed nationwide in 2008.
People who own a home but do not live in that home will not be eligible for relief, including individuals and speculators who bought multiple homes as investments. People who have too much debt and can't afford a mortgage payment even with significant rate cuts won't be eligible for the loan modifications. (azrep21909)
MORAL
If the lenders buy into it then business should pick-up. The primary problem with the above theory is: Most of the mortgages are in MBS status, so who is the lender and who gives the trustee of the mortgage securities authority to reduce the return without the risk of being sued for compromising the value of the securities?
CRIMINAL INDICTMENT FILED BY CALIFORNIA STATE ATTORNEY GENERAL AGAINST THOMAS JOHN HASTERT OF NEVADA COUNTY
FACTS
Thomas John Hastert, a licensed California real estate broker, has been charged with 73 criminal counts filed by State Attorney General Jerry Brown and the Nevada County District Attorney Cliff Newell's office in Nevada County Superior Court charging Hastert with a massive mortgage fraud case that may have cost hundreds of investors up to $21 million.
The charges allege that between 2004 and 2007 he misled investors, embezzled brokerage fees and set up straw buyers in a complex scheme involving properties in Nevada, Sacramento, Sutter, Butte, Placer and Yolo counties.
Hastert could face up to 11 years and four months in prison if convicted of the charges. (sacbee22109)
MORAL
You are innocent until proven guilty.
CALIFORNIA FORMER MORTGAGE BROKER CHARGED WITH MORTGAGE FRAUD WHILE DOING TIME IN PRISON
FACTS
Federal mail fraud charges have been filed against a former Redding mortgage lender and consultant who was sentenced in July 2008 to 16 months in prison for passing nearly $7,000 in bad checks. The federal criminal complaint was filed on Feb. 11 in U.S. District Court in Sacramento against Joshua Alan Gervolstad.
The criminal charge alleges that Gervolstad defrauded mortgage lenders by obtaining home refinancing using fraudulent appraisals in which he allegedly inflated the value of the properties. The five properties he refinanced netted about $925,000 in escrow money that went to Gervolstad's firm, TPG Investments.
Currently residing at High Desert State Prison in Susanville, Gervolstad from Feb. 1, 2006, through Jan. 1, 2007 allegedly altered appraisals by inflating them to $3.4 million more than the properties were worth. Refinancing loans were then made by First Magnus Financial Corporation in Roseville and each refinancing resulted in a disbursement of funds to TPG Investments.
In 2006, before the bad check charge that landed him in prison, Gervolstad pleaded no contest to embezzlement for defrauding a Downey man of $90,000 in a real estate scam. He served 15 days of a 90-day jail sentence and was placed on informal probation. (redseardh21809)
MORAL
Goes from 15 days in jail, to 16 months in state prison and now he looks forward to federal prison. Not a nice future but he will not be foreclosed upon and he does get room and board if convicted.
SIX INDICTED IN ILLINOIS FOR $10 MILLION MORTGAGE FRAUD
FACTS
Six Chicago area defendants were indicted on federal charges for allegedly fraudulently obtaining more than $10 million in mortgage loan proceeds from various lenders by submitting false loan applications and supporting documents. The defendants include loan officers, processors, a contractor and an unlicensed appraiser charged with one or more counts of mail, wire or bank fraud in an eight-count indictment that was returned by a federal grand jury on Feb. 19, 2009. The indictment specifies eight residential properties upon which mortgage loans were fraudulently obtained between 2002 and 2007. (Notice how the federal prosecutors went back to loans that occurred over seven years ago!)
Deangelo McMahan, of Hazel Crest, and Fred Haywood, of Chicago, both of whom were loan officers for various mortgage lenders, were initially indicted in December 2008. Four new defendants are Rita McKenzie, of Round Lake Beach, a loan processor; Steve Young, of Flossmoor, a loan officer; Carl McMahan, of Round Lake Beach, Deangelo McMahan's brother who operated a purported home re-construction business; and Sumira Persaud, of Blue Island, an unlicensed appraiser.
The indictment alleges the defendants schemed to arrange for buyers with good credit, but insufficient income, to purchase homes by promising them money for acting as nominees, knowing that in most cases the buyers did not intend to occupy the homes as their primary residences or fulfill any long term payment obligations. The defendants and others caused false information to be included in mortgage loan applications regarding the applicant's income, assets, employment, intention to occupy the home and the source of the down payment so the applicant would falsely appear to qualify for a loan. They also allegedly schemed to create false appraisals that did not reflect the fair market value of the properties and were designed to create excess value. In some instances the defendants funneled excess cash they generated from inflated appraisals on the properties to sham businesses they had created, while other times they flipped the properties from one sale to another to make a profit, the charges allege.
The indictment also seeks forfeiture of $2,383,020, which reflects the loss suffered by various mortgage companies that were victims of the alleged fraud scheme.
Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, while bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine. The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent until proven guilty beyond a reasonable doubt. (usattynodistill21909)
MORAL
There are several morals: 1-The federal government is indicting people that did fraud loans over seven years ago. 2-Indicating primary residence on the 1003 is a felony as you can see. Did anyone take a loan and on the 1003 put primary residence when in fact it was an investment property? Indictments are increasing on this charge. 3-Notice how they are seeking to forfeit the property owned by the brokers, loan officers and others indicted more frequently now as opposed to in the past. You can now lose your home if it was purchased with money earned on fraud loans. Not very appealing, is it? See your attorney now rather than after the people with gold badges visit you so you can mitigate the problem.
VICE PRESIDENT OF MARYLAND MORTGAGE MONEY STORE PLEADS GUILTY TO FORECLOSURE FRAUD
FACTS
Chandra Jones, of Lanham, Md., pleaded guilty on Feb. 6, 2009 to conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit.
Chandra Jones was hired to work as a loan processor at the Metropolitan Money Store, located in Lanham, which offered foreclosure consultation and credit services to financially distressed homeowners. Shortly after she began working at MMS, Jones conspired with others in a scheme to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit.
The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid to participate in the scheme.
Using the homeowners' properties, the conspirators applied for mortgages to extract the maximum available equity from the homes and prepared and submitted to mortgage lenders fraudulent loan applications to obtain inflated loans on the target properties in the straw buyers' names. At settlements, the conspirators imposed numerous fees and required "seller contributions" which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators' business and personal bank accounts and converted a substantial portion of those funds to their personal use.
In November 2005, Jones was hired to work at Fordham & Fordham Investment Group, Ltd., a Maryland corporation based in Lanham and Greenbelt that assisted MMS in its foreclosure consulting and credit servicing business. Jones was responsible for paying the mortgages on foreclosure reversal program properties and assisting program participants with repairing their credit. Jones was later made vice-president of F&F and was also made a director of Burroughs & Smythe Financial Services, Inc., another Maryland corporation that assisted MMS in its foreclosure consulting and credit servicing business. Jones was not licensed to provide credit repair services and had not received any training related to the mortgage industry, credit repair, or financial services.
During the course of the conspiracy, Jones placed $788,978.30 from F&F's bank accounts into her personal bank accounts. Chandra Jones also agreed to serve as a straw buyer for two properties, and secure mortgage loans in her own name to do so, because she had a good credit history. In purchasing the properties Chandra Jones made false statements as to personal and financial information on settlement documents. As a result of this scheme, the total loss attributable to Chandra Jones, including the estimated losses to the mortgage lenders, is $4,189,283.86.
Jones faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy. Sentencing is Oct. 5, 2009 at 9:30 a.m.
Chandra Jones, the daughter of co-defendants Jennifer and Clifford McCall, is the sixth defendant to plead guilty in the Metropolitan Money Store mortgage fraud scheme. Jennifer McCall, of Ft. Washington, Md., chief executive officer of Metropolitan Money Store and owner of JC and JC Investments LLC; Katisha Fordham, of Washington, a loan processor at the Metropolitan Money Store; Richard Allison, of Camp Springs, Md., an attorney and employee of the U.S. Census Bureau; Clifford McCall, of Lanham, president of Burroughs & Smythe Financial Services Inc., based in Lanham and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, and Carlisha Dixon, of Hyattsville, Md., vice president and a director of Burroughs & Smythe Financial Services, Inc.; each pleaded guilty to the conspiracy and are facing a maximum sentencing of 30 years in prison. (usattymd2609)
MORAL
Over $4 million in losses buys a lot of time in federal prison. Now think about stated income loans in 2005. Most of those were fraudulent income statements a federal offense. If you were involved in creative stated income, I suggest you see your attorney to mitigate the problem before the FBI or the U. S. Attorney does it for you.
MARYLAND MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Terrence White, of Oxon Hill, Md., pleaded guilty on Feb. 12, 2009 to mail fraud arising from the fraudulent purchase of 25 properties in Maryland, the District of Columbia and Virginia using false mortgage and settlement documents. Osman Sharrieff Al-Bari, of Washington, was arrested for mail and wire fraud, and Jamilah Al-Bari, of Districts Heights, Md., was arrested for mail fraud, arising from this scheme. Their indictment was returned on Feb. 10, 2009.
White and others paid over 15 straw purchasers $10,000 per property to purchase houses for White and others. White created false mortgage and settlement documents, many of which misrepresented the straw purchasers' income and assets. White and others also created false invoices to claim that their company, Brotherly Investment Group, performed "renovations" on some of the properties. Using these false invoices, White and others were "repaid" at closing for the purported renovations. White was an organizer and leader in this scheme. From 2006 to 2008, White and others received approximately $3,830,418 in fraudulent funds as part of this scheme. Many of the purchased properties have been foreclosed upon.
The 11 count indictment alleges that Osman and Jamilah Al-Bari performed the same acts in the scheme as White. The indictment also alleges that Osman received wire transfers of $515,820 for the purported renovations of properties. Jamilah is alleged to have abused her position as a business banking liaison at a Maryland bank by: creating several false documents to verify assets for straw buyers; sending false verification letters on bank letterhead to banks and mortgage lenders to facilitate the fraud scheme; and creating fictitious bank employees to sign some of the false verification letters. Jamilah is alleged to have received a check or cash, disguised as a consulting fee, for each fraudulent transaction she helped to facilitate.
The indictment alleges that the total value of these fraudulent loans was approximately $18 million. An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
All three defendants face a maximum sentence of 30 years in prison for mail fraud. Osman also faces a maximum sentence of 30 years for wire fraud.
Timothy Reed, of Beltsville, Md., pleaded guilty on Feb. 10, 2009 to mail fraud in connection with his participation in this scheme. No sentencing date has been set. Sabrina Weinberg, of Bethesda, Md., pleaded guilty on Nov. 18, 2008 to mail fraud. No trial date has been set for co-defendant Kara McIntosh, who was indicted on the same charges on Nov. 18, 2008, (usattymd21209)
MORAL
Any guesses as to who is cooperating with the United States Attorney?
NEVADA MORTGAGE BROKER AND MORTGAGE BANKER RESTRICTIONS ON COLLECTING ADVANCE FEES
FACTS
Commissioner Joe Walmuth wishes to remind originators that all advance fees, including application fees, collected by a licensee must be placed in escrow. These fees can only be released to the licensee upon completion of the loan commitment or the loan. In the event no loan commitment is obtained or the loan does not close, the advance fees must be returned to the person who paid them.
The only exception to this is that fees paid to third persons, such as credit report fees paid to a reporting agency, need not be refunded if the person who paid them first signs an advance fee agreement. There is no required form of advance fee agreement, but the law does impose certain requirements.
Mortgage Brokers and Mortgage Agents
NRS 645B.165 . . .
1. Except as otherwise provided in subsection 3, the amount of any advance fee, salary, deposit or money paid to a mortgage broker and his mortgage agents or any other person to obtain a loan which will be secured by a lien on real property must be placed in escrow pending completion of the loan or a commitment for the loan.
2. The amount held in escrow pursuant to subsection 1 must be released:
a. Upon completion of the loan or commitment for the loan, to the mortgage broker or other person to whom the advance fee, salary, deposit or money was paid.
b. If the loan or commitment for the loan fails, to the person who made the payment.
3. Advance payments to cover reasonably estimated costs paid to third persons are excluded from the provisions of subsections 1 and 2 if the person making them first signs a written agreement which specifies the estimated costs by item and the estimated aggregate cost, and which recites that money advanced for costs will not be refunded. If an itemized service is not performed and the estimated cost thereof is not refunded, the recipient of the advance payment is subject to the penalties . . .
The provisions above are identical for Mortgage Bankers under NRS645E.
MORAL
Pay attention or lose your license or pay a penalty or both. Remember under the new S.A.F.E. Act it can actually cost you your license nationwide, let alone in Nevada. The Advance Fee Agreement is easily drawn. If you cannot or do no desire to do it yourself, you may contact us and we will do one for you. The fee is $500 to answer that question in advance.
FOUR PEOPLE IN NEW YORK INDICTED FOR A $10 MILLION
MORTGAGE FRAUD SCHEME
FACTS
An indictment was unsealed on Feb. 18, 2009 in New York with charges against SHARMON HOWELL, a/k/a "Sharmon Wade," DAVID MOORE, JUNE PERSAUD, and OSCAR ANCRUM, a/k/a "Red," a/k/a "Manny," for their roles in a "sub-prime" mortgage fraud scheme involving more than two dozen loans which totaled over $10 million. HOWELL, of Queens, was arrested on Feb. 18, 2009 in Manhattan. PERSAUD, of Brooklyn, is expected to surrender to authorities. MOORE, of Brooklyn, and ANCRUM, of New York, remains at large.
According to the indictment unsealed in Manhattan federal court on Feb. 18, 2009, from 2006 through 2007, HOWELL was the leader of a scheme to obtain dozens of home mortgage loans by fraud. Specifically, the defendants submitted to various banks and lenders mortgage applications and supporting documentation which contained false and misleading information. The defendants obtained over $10 million in subprime mortgages for individuals and on terms that the lender would not have approved had the defendants not submitted the fraudulent documents.
The defendants recruited straw buyers to purchase properties in and around New York City. The straw buyers were recruited from, among other places, a halfway house in New York City that served individuals recently released from prison and a public housing complex in Brooklyn. The defendants told the straw buyers that, by purchasing the homes, they would be assisting sellers who were trying to save their homes from foreclosure and/or that purchasing the homes would be a good investment opportunity. Several of the straw buyers were also told that they would not have to worry about paying the mortgage because the defendants would make payments for several months, and thereafter would repurchase and/or sell the properties from the straw buyers. (sound familiar)
The defendants typically obtained mortgages on behalf of the straw buyers for amounts greater than the actual sale price of the homes with fraudulent appraisals for the homes, and misrepresented to the lenders various material facts about the straw buyers' income, assets, debts, and intent to live in the properties they were purchasing.
After obtaining these mortgages, the defendants distributed among themselves the difference or "spread" between the price of the house and the inflated value of the mortgage. Thereafter, in some instances, the defendants rented the property out and made mortgage payments for a time before allowing the mortgage to go into default; in other instances, the defendants simply failed to make mortgage payments resulting in the straw buyers of certain of the properties going into default on the mortgage.
Each defendant is charged with one count of conspiracy to commit bank fraud and wire fraud. In addition, HOWELL and MOORE are charged with six counts of bank fraud and two counts of wire fraud; PERSAUD is charged with two counts of bank fraud and one count of wire fraud; and ANCRUM is charged with two counts of bank fraud. The conspiracy charge and the bank fraud charges each carry a maximum potential sentence of 30 years in prison and a fine of the greater of $1 million, or twice the gross gain or loss resulting from the crime. Each wire fraud charge carries a maximum sentence of 20 years in prison and a fine of the greater of $250,000, or twice the gross gain or loss resulting from the crime.
The indictment also seeks the forfeiture of $10 million from the defendants. The forfeitures represent the alleged proceeds obtained from the charged offenses. (usattysodistny21809)
MORAL
Did you notice in the newer cases, they generally go out and arrest rather than let the defendants turn themselves in? Did you also notice the sentences appear to be getting stiffer? I presume you can guess why.
NEW YORK ATTORNEY FOUND GUILTY
OF MORTGAGE FRAUD
FACTS
Attorney ALEXANDER KAPLAN was found guilty after a two-week jury trial in Manhattan federal court, on all eighteen counts in the indictment against him of participating in a multimillion-dollar mortgage fraud scheme.
From late 2004 through January 2007, KAPLAN and his coconspirators, using phony purchasers, or straw buyers, obtained hundreds of mortgage and home equity loans by submitting to various lenders loan applications and supporting documents that contained false information about, among other things, the prospective borrower's employment, income and assets, and intent to reside in the property in question, as well as the fair market value of the property.
In addition, KAPLAN and his co-conspirators, using artificially inflated appraisals, sought and obtained mortgages and home equity loans at values that were in excess of properties' actual sale prices. The difference between the appraised value and actual sale price of the property represented, in the part, the profits from the scheme.
KAPLAN participated in the scheme by acting as a lawyer for the straw buyers and providing misleading and false information to the lenders. As shown at trial, concerning a block of 10 rent-regulated condominium apartments at 243 West 98th Street, on the Upper West Side of Manhattan, KAPLAN served as the attorney for the buyers and the banks in the closings of sales of the apartments, supported by 100% financing. None of the documents submitted to the lenders in these transactions disclosed that: (1) certain buyers were seeking loans to purchase more than one apartment as a "primary residence;" (2) each of the apartments was already occupied by a tenant, and therefore not suitable for a primary residence; or (3) the apartments were subject to rent regulation laws that precluded the buyer from charging the reported rents.
KAPLAN presided over the closings, and obtained for submission to the lender signed and completed false documents, including, among other things, loan application documents, on which each of the buyers indicated that the apartment was to be a "primary residence," and false affidavits stating that the buyers intended to occupy the apartments.
Almost all of the apartments were then resold, or "flipped," to straw buyers within a matter of months. The purported sales prices for each of the flips was almost twice the initial purchase price, and KAPLAN's co-conspirators obtained almost $13 million in additional loans on the apartments by submitting false information and documents to the lenders.
KAPLAN served as both the buyer's and seller's attorney in connection with the flip transactions, drafting sham contracts of sale and other documentation. KAPLAN also served as the attorney for the banks in connection with certain of the flip transactions, and distributed a portion of the loan proceeds to his co-conspirators.
KAPLAN, of Brooklyn, was found guilty of one count of conspiracy to commit bank, wire, and mail fraud; six counts of bank fraud; eight counts of wire fraud; and three counts of mail fraud. The conspiracy count carries a maximum prison sentence of 30 years and a fine of $1 million or twice the gross gain or loss resulting from the offense. Each of the substantive bank, wire, and mail fraud counts carries a maximum prison sentence of 30 years and a fine of $1 million or twice the gross gain or loss resulting from the offense.
KAPLAN is scheduled to be sentenced on May 1, 2009. Of the 26 other defendants originally charged with KAPLAN in United States v. Aleksander Lipkin, et al., 25 have pleaded guilty. The case against JOHN CIAFALO remains pending. (usattysodistny2609)
MORAL
18 counts. Full trial. Guilty on all counts. I would say Mr. Kaplan is looking at over 10 years in a federal prison. Notice that putting on the loan application the purchase is for your primary residence is a felony. Anyone do that on their 1003's?
OHIO MORTGAGE BROKER DRAWS 51 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
James Mahoney, of Mason was sentenced in United States District Court on Feb. 17, 2009 to 51 months imprisonment for fraud he committed in connection with his purchase of more than $2.3 million in real estate.
Mahoney also has to pay $645,925 in restitution to financial institutions that were victims of the fraud. In October, 2008, Mahoney pleaded guilty to one count of mail fraud. Mahoney kept $730,000 from the sale of his house in Middletown in 2001 instead of paying off his mortgage and concealed the fact with a fraudulent "Satisfaction of Mortgage" document. In 2006, Mahoney secured a loan for $1,625,000 to buy a house in Butler County. He again created a fraudulent document when he refinanced the loan in April 2007 and kept the money instead of paying off his earlier loan. For at least the last 15 years Mahoney worked in various aspects of the residential real estate lending business, having been employed by lending institutions and operating his own business. (usattysodistohio21709)
MORAL
Now he will spend the next four years in a federal institution learning how to make license plates.
FORMER OREGON MORTGAGE BROKER INDICTED FOR MORTGAGE FRAUD
FACTS
Kamau Herndon, of Portland, Ore., was arraigned in Federal District Court on Feb. 17, 2009 because he is alleged to have committed three fraudulent home sales taking thousands of dollars for himself from each of them. He is the third former employee of Lighthouse Financial Group, a large Vancouver mortgage brokerage, to be charged with federal crimes. A federal grand jury charged Herndon with 11 counts of mail and wire fraud, money laundering and aggravated identity theft. Herndon pleaded not guilty to all charges.
Between November 2006 and March 2007, Herndon allegedly conducted home purchases in Portland, Milwaukie and Edmonds, Wash. The buyer was allegedly Herndon's then-girlfriend but federal prosecutors claim she wasn't aware of the transactions. Herndon submitted loan applications containing inflated income numbers and other inaccurate financial information, the government claims.
Herndon is the fifth Portland-area resident from the mortgage industry to be indicted on fraud or related charges since February 2008. In the summer of 2008 Marty Folwick, who also worked for Lighthouse for a time, was indicted on similar fraud charges. Folwick pleaded guilty and was sentenced in December 2008 to more than five years in federal prison. (oreglive.com22109)
MORAL
Seems like things are picking up in Portland.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
