A REMINDER ABOUT RESPA VIOLATIONS
FACTS
A referral under RESPA is defined by 24 C.F.R. § 3500.14(f) as follows:
(1) A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business.
(2) Claims pursuant to § 2607(a) must be brought within one year from the date the violation occurs in accordance with 12 U.S.C. § 2614, which provides in relevant part:
Any action pursuant to the provisions of section 2607 of this title may be brought within one year in the case of a violation of section 2607 from the date of the occurrence of the violation.
MORAL
The good news is a borrower only has one year to sue you. The bad news is HUD can chase you for a longer time.
FEDERAL TRADE COMMISSION FILES LAWSUIT AGAINST NEVADA MORTGAGE BROKER CHARGING VIOLATION OF PRIVACY LAWS
FACTS
The Federal Trade Commission has charged Gregory Navone, of Las Vegas, who was previously a mortgage broker, with discarding consumers' tax returns, credit reports, and other sensitive personal and financial information in an unsecured dumpster, in violation of federal law.
According to the FTC, in December 2006, (over 2 years ago!) approximately 40 boxes containing consumer records were found in a publicly accessible dumpster. The records included tax returns, mortgage applications, bank statements, photocopies of credit cards and drivers' licenses, and at least 230 credit reports. The FTC alleges that the defendant, who has owned numerous companies that handle sensitive consumer information, kept the documents in an insecure manner in his garage before improperly disposing of them.
As charged in the FTC's complaint, the defendant has failed to implement and monitor policies and procedures requiring secure disposal of credit reports; ensure that employees or third parties assigned to transport such documents for disposal are qualified to do so and have received appropriate guidance or training; alert employees or third parties to such documents' sensitive nature or instruct them to take precautions; and oversee the transport of such documents for disposal, or otherwise confirm that the documents are disposed of in a way that ensures that they cannot practicably be read or reconstructed.
The complaint also alleges that the Gregory Navone provided customers of two mortgage brokerage companies that he owned -- First Interstate Mortgage Corp. and Nevada One Corp. -- with a written statement claiming that the companies maintained "physical, electronic, and procedural safeguards that comply with federal standards to store and secure information about you from unauthorized access, alteration and destruction." The statement also claimed that the companies contractually required third-party service providers to safeguard consumer information and use it only to provide services for FIM and Nevada One. According to the FTC, however, the defendant failed to implement reasonable data security measures in key areas at the companies, including the physical and electronic security of sensitive consumer information; the proper collection, handling, and disposal of such information; and employee training. The defendant also failed to provide reasonable oversight of the handling of the information by service providers, including by contractually requiring them to maintain appropriate safeguards for the information.
Gregory Navone is charged with violating the Fair Credit Reporting Act and the rule regarding Disposal of Consumer Report Information and Records (Disposal Rule) by failing to take reasonable measures to protect consumer information derived from consumer reports against unauthorized access in connection with its disposal. He is also charged with violating the FTC Act by falsely representing that FIM and Nevada One implemented reasonable and appropriate measures to protect sensitive consumer information from unauthorized access, and that the companies contractually required service providers to safeguard customers' information and use it only to provide services for FIM and Nevada One.
The complaint was filed in the United States District Court in Nevada on Dec. 30, 2008. (Case 2:08-cv-01842)
MORAL
One corporation is dissolved. The Secretary of State revoked the other and two years after the FTC finds out, it chases the individual. That is really government efficiency! Navone was served with the complaint and response due in this month. We will see what happens.
In the meantime do you have a privacy manual as required by the Fair Credit Reporting Act? Do you have a Red Flag identity theft manual required as of May 1, 2009? If not, then you too may look forward to being disciplined by the state licensing agency and FTC. See below the follow up story on the California broker whose files were found in a dumpster also. If you need any of the two manuals let us know.
FANNIE MAE AND FREDDIE MAC WILL NOW BE ABLE TO CATCH FRAUD EASIER STARTING IN 2010
FACTS
James B. Lockhart, director of the Federal Housing Finance Agency, on Jan. 15, 2009 announced that, effective with mortgage applications taken on or after Jan. 1, 2010, Freddie Mac and Fannie Mae are required to obtain loan-level identifiers for the loan originator, loan origination company, field appraiser and supervisory appraiser. A licensing system owned and operated by State Regulatory Registry LLC will be used to license and register loan originators. The Conference of State Bank Supervisors in cooperation with the American Association of Residential Mortgage Regulators established the State Regulatory Registry LLC.
MORAL
Do not sign 1003 loan applications for unlicensed people inside or outside your company. Between FHA, Fannie Mae and Freddie Mac with your unique loan identifier, you will be in trouble and out of business if the loans go bad. Do you really want to lose your livelihood?
ARIZONA FEDERAL DISTRICT COURT SENTENCES TRIO TO PRISON FOR MORTGAGE FRAUD
FACTS
Micah Bowens, of Henderson, Nev., pleaded guilty to 23 counts and was sentenced on Feb. 25, 2009 to four years in prison for leading a mortgage fraud scheme involving a reported $2.5 million loss to lenders in Phoenix, Las Vegas and San Diego.
Jennifer Sellers, a real estate agent in Las Vegas , pleaded guilty to two counts and was supposed to be sentenced to 24 months in prison on Feb. 23. She was alleged to have prepared the mortgage loan applications misrepresenting salary, assets and liabilities. Alonzo Love, from San Diego, pleaded guilty to one count and was sentenced to 14 months on Feb. 17.
They are alleged to have used the social security number belonging to someone else in their crimes.
Seven other co-conspirators were charged, have reportedly pleaded guilty and the remainder will be sentenced. The seven others are Lutrell Maurice Sharpe, the alleged ringleader, Charles Dozzell and Angila Romious both of California, and Arizona residents Alonzo Love, Breanna Carmela Davis, Misti Lenoir-Stewart, and Autumn-Leigh Bruce, Marcus V. Dozzell, Gina Marie Greco, and Kristy Lynn Murdock.
The mortgage fraud took place from 2002 to 2007 involving properties in San Diego, Las Vegas and Phoenix. Bowens, Sellers and Love fraudulently submitted mortgage loan applications, on behalf of straw buyers, obtaining and disbursing the proceeds of the fraud loans to bank accounts in Bowen's, Seller's, Love's and others.
Lutrell Sharpe and Marcus Dozzell were sentenced recently to 88 months and 45 months. (usattyaz21209homeqrptr51407)
MORAL
Busy little beavers, weren't they? This fraud goes back to 2002. Did you do stated income loans? Anyone asking questions about you that you do not know? See your attorney now before a prison later.
CALIFORNIA BROKER UNDER INVESTIGATION ABOUT LOAN FILES LEFT IN SCHOOL DUMPSTER
FACTS
The California Department of Real Estate are investigating how loan application files containing everything from bank statements to credit reports, tax forms and social security numbers found their way into bins at Mariners Elementary School recycling center. The files belonged to customers of Seaview Financial that had offices in Corona del Mar. Tom Pool, spokesperson for the Department of Real Estate is quoted as saying: "We are looking into it." The owner of Seaview, Paul H. Reed, denied any wrongdoing, saying he hired a company to burn the documents. When asked, he declined to name the company or provide receipts. Mr. Pool is quoted as saying disciplinary proceedings are not ruled out which can include revocation of the license of Mr. Reed. (ocreg22809.mpw)
MORAL
I would suggest Mr. Reed obtain a good lawyer now, rather than later after the DRE or a lawsuit comes knocking at this door.
FTC SUES CORPORATION AND INDIVIDUALS IN CALIFORNIA FOR "MORTGAGE FORECLOSURE RESCUE SCAM"
ASSETS ARE FROZEN
FACTS
The Federal Trade Commission has charged a mortgage foreclosure rescue company with falsely claiming that it will stop foreclosure or fully refunds consumers' money. A federal court ordered a halt to the alleged practices and froze the defendants' assets pending trial. Many people who paid the company ultimately lost their homes to foreclosure, and others avoided foreclosure only through their own efforts. The FTC seeks to prohibit the deceptive claims and make the company pay consumer redress.
According to the FTC, the company promotes its "Fresh Start Program" by mailing ads to consumers who are behind on their mortgage payments and facing foreclosure. One of its postcards states, "We are happy to inform you that you have been pre-approved to have your current mortgage, including your past due payments, wrapped into a new loan ... Following final approval, our program may allow any foreclosure proceedings to be stopped." Another version of the postcard states, "It is required that you are notified of these options. We have attempted to contact you without success. Please contact us soon. Your time to enter a repayment plan is running out. Rights may include: 1. a repayment plan 2. putting your past due payments into the balance of the loan 3. paying your past due payments at the end of your loan. 100% GUARANTEE."
Consumers who call the company are told that negotiations with lenders will begin once consumers pay a fee ranging from $300 to more than $1,000, which typically is paid before the consumer receives a contract. After the fee is paid, the company often doesn't return consumers' phone calls, and in many instances when consumers manage to reach a company representative they're told, falsely, that negotiations are proceeding.
The Commission charged the company with violating the FTC Act by falsely representing that it will stop foreclosure in all or virtually all instances, and that it will give full refunds if foreclosure is not stopped.
The defendants are National Foreclosure Relief Inc., David Ealy, Chele Stone, also known as Chele Medina, and Hugo Tapia. The complaint was filed in the U.S. District Court for the Central District of California on Feb. 2, 2009; the court entered a temporary restraining order and asset freeze later that day. The court did it on FTC request without notification to defendants. (Case No.: 8:09-cv-00117-DOC-MLG)
MORAL
I bet defendants were surprised when they found the assets were frozen and they could not gain access. It will be interesting to see where this case goes over the next several months. If you want to follow it use case number and access through PACER.
NEW JERSEY MAN PLEADS GUILTY TO PROPERTY FLIPPING
FACTS
Norman Barna, who owned and sold two- and three-family rental properties in Paterson, N.J., pleaded guilty before U.S. District Judge Jose L. Linares to one count of wire fraud conspiracy, which carries a maximum statutory penalty of five years in prison and a fine of $250,000.
Barna faces an actual sentencing range of between 12 and 18 months in prison. Judge Linares has discretion in imposing a sentence within, above or below the guidelines range.
Barna admitted that he had an arrangement with Michael Eliasof, a former Paramus real estate agent, to sell properties in Paterson under which Barna would receive a $25,000 profit for each property sold. Barna also admitted that some of these properties were in poor condition and that the sales prices for these properties generally were higher than the properties were worth. Barna admitted signing HUD-1 settlement statements containing false representations.
Barna also stated that he knew that some of these real estate transactions were financed by US Mortgage Corp., through loan officer Gerald Carti. According to Barna, Eliasof later told him that a woman at US Mortgage was making Carti refinance those loans.
Carti has pleaded guilty. See his involvement in more detail in the article after this one.
Barna's guilty plea is the latest step in an investigation by the U.S. Department of Housing and Urban Development Office of Inspector General, the FBI, the U.S. Postal Inspection Service and the IRS Criminal Investigations Division into fraudulent Federal Housing Administration-insured and conventional mortgage loans originated by various New Jersey mortgage companies, including US Mortgage and United Home Mortgage. The investigation has resulted in 13 GUILTY PLEAS FROM NEW JERSEY RESIDENTS, INCLUDING ELIAS CARTI AND BARNA. (usattynj22509)
MORAL
A reminder to you. The names of people and companies are bold faced so you can decide whether you do or do not want to do business with them in the future and more importantly whether you have done business with them in the past. If so, you should seriously consider redoing a very detailed quality control on the loans with which the people or the companies were involved.
FORMER LOAN OFFICER GERALD CARTI OF U. S. MORTGAGE PLEADS IN NEW JERSEY GUILTY TO MORTGAGE FRAUD
FACTS
Gerald Carti, a former loan officer and shareholder of Pine Brook-based US Mortgage Corp., pleaded guilty today to wire fraud conspiracy and money laundering conspiracy in connection with a mortgage fraud and property-flipping scheme involving rental properties in Paterson, N.J. He had been indicted on 25 different criminal counts along with three co-defendants. He admitted conspiring with his co-defendants and several others to originate mortgage loans fraudulently and to launder proceeds of the loans during 2002 through 2005. The loans were for two- and three-family homes in Paterson.
Did you notice they went back to loans done seven years ago? Did you do any stated income loans?
Carti pleaded guilty to one count of wire fraud conspiracy, which carries a maximum statutory penalty of 30 years in prison and a fine of $1 million, and one count of money laundering conspiracy, with a maximum statutory penalty of 10 years in prison and a fine of $250,000.
Carti faces an actual sentencing range of between 46 and 71 months in prison. He will also be required to pay restitution to the victims, estimated at $1,030,745, not including interest.
Carti admitted that he conspired with Michael Eliasof, a former Paramus real estate agent; W.C., a now-deceased Garfield attorney previously identified as an unindicted coconspirator; Melanie Gebbia, W.C's legal assistant; William Ottaviano, an appraiser; Frank Corallo, a former US Mortgage loan processor; co-defendant Renford Davis, of Paterson, and Hopeton Bradley, who jointly managed many of the Paterson properties involved in the scheme; and others. Eliasof, Gebbia, Ottaviano, Corallo, Bradley (who has since died) and one other conspirator have each pleaded guilty in connection with this scheme.
A trial is scheduled to begin on May 4, 2009 for Davis and co-defendants Amer Mir, of Jersey City, and Frederick Ugwu, of Saddle River.
Carti admitted helping Eliasof obtain mortgage loans for various borrowers to purchase two- and three-family homes in Paterson, knowing that the borrowers would be putting no money down to purchase the properties. Carti further admitted permitting the borrowers to submit loan applications to US Mortgage falsely stating that they had made substantial down payments and allowing US Mortgage to fund the loans, even though the borrowers had not made any down payments. Carti also admitted that the closings of the loans took place at the law office of W.C., then a Garfield municipal judge.
Carti also admitted that by April 2004, Residential Funding Corporation informed US Mortgage that some of the loans were part of a scheme involving Carti, Eliasof and W.C. According to Carti, during a meeting concerning these allegations, M.M. and S.M., both senior officers at US Mortgage, were informed that the loans were no-money-down deals. Carti stated that after the meeting, S.M. directed him to pay off the loans by refinancing them through new mortgage loans for the existing unqualified borrowers or reselling the Paterson properties, which Carti partly accomplished with Corallo's assistance by originating new mortgage loans for some of the Paterson properties through US Mortgage. According to Carti, S.M. insisted that these new mortgage loans be brokered, rather than funded and underwritten by US Mortgage. Carti admitted that he gave applications for mortgage loans for some of the properties to his co-defendant, Mir, a loan officer at Jersey City-based United Home Mortgage Co., who demanded bribes from others to ensure that the mortgage loans being sought were funded. Finally, Carti admitted that in 2002, S.M. told him he would receive a commission from American Title & Settlement Services LLC, which S.M. controlled, for each mortgage loan that he referred to American Title for title insurance, and that he received these commissions through an entity called Dream On Enterprises LLC. (usattynj22409)
MORAL
Let me see? S.M. is allegedly telling a loan officer to take a funded fraud loan and have it refinanced through the same company as a brokered loan. I would say that S.M. had better find a good attorney since he is allegedly telling a loan officer that knowingly did a fraud loan to refinance it as a brokered loan and I am presuming it is to be done without notifying the new lender of the fraud in the first instance.
SIX PEOPLE INCLUDING AN ATTORNEY IN TROUBLE OVER MORTGAGE FRAUD IN NORTH CAROLINA
FACTS
George Mascaro, a former real estate agent in Charlotte, N.C., was sentenced Feb. 27, 2009 to two years in prison for his role in a mortgage fraud case involving more than $15 million in loans and 270 properties. Mascaro was accused of participating in a builder kickback scheme. He was among six defendants indicted in connection with alleged mortgage fraud schemes in Mecklenburg and surrounding counties involving appraisers, lawyers, mortgage brokers, builders and investors. Mascaro pleaded guilty to conspiring to commit mail, wire and bank fraud and conspiring to commit money laundering.
Former real estate agent Gregory Rankin, who was also accused of participating in a kickback scheme and pleaded guilty to conspiring to commit mail, wire and bank fraud, was ordered to spend a year on house arrest. He was also placed on probation for five years.
Federal prosecutors alleged they lied about buyers' income, providing false bank statements and tax returns and paying bribes to local businesses for bogus verification of employment. They also paid kickbacks to real estate agents, investors and straw buyers who lent their names and credit to the schemes, according to the indictment.
Jules Springs, a mortgage broker, pleaded guilty and is awaiting sentencing. He was accused of participating in the builder kickback scheme.
Michael Pahutski, a mortgage broker, had pleaded not guilty but he filed a notice to change his plea to guilty.
Victoria Sprouse, a Charlotte real estate lawyer, and Michael Gee, a Mooresville real estate broker, have pleaded not guilty and are going to trial March 2009. Sprouse played a role as closing attorney in many of the property transactions, according to the indictment. Gee is accused of participating in a house-flipping scheme. (charobs22809)
MORAL
Kickbacks. Bribes. Anyone out here pay a real estate agent for a loan referral? Guess what. It is illegal and I can give you the federal code section if you like.
OHIO AND INDIANA AGS CRACK DOWN ON FORECLOSURE RESCUE SCAMS
FACTS
Ohio attorney general Richard Cordray filed a lawsuit against two Cincinnati-based foreclosure rescue companies accused of failing to deliver on their promises to save consumers from foreclosure. The suit, filed in the Hamilton County Court of Common Pleas, charges Foreclosure Assistance USA Inc. and American Foreclosure Professionals Inc. with several violations of Ohio consumer protection law.
An investigation of FA USA and AFP, found that the same individual serves as president of both companies and that the two companies offer similar foreclosure assistance services to consumers facing foreclosure. In addition to direct mail, AFP also advertises its services at www.helpstopforeclosurenow.net.
The lawsuit charges the companies with violating Ohio's Consumer Sales Practices Act, Credit Services Organization Act and Debt Adjusters Act. The attorney general's office currently has four unresolved complaints against AFP, with damages ranging from $700 to $900 each. The office also has four unresolved complaints against FA USA, with alleged damages between $900 and $1,200 each.
In the lawsuit, Mr. Cordray asks the court to prohibit FA USA and AFP from committing further violations of the law and to require the companies to reimburse consumers and pay civil penalties.
Indiana attorney general Steve Carter filed a lawsuit against Indianapolis-based Capital Foreclosure Inc. seeking nearly $20,000 in restitution for customers and an injunction to halt the company and its operators from illegal practices. According to Mr. Carter's suit, nearly 20 people sought "foreclosure rescue" and credit counseling services from Capital Foreclosure. Individuals paid fees and other costs that ranged from $40 to as high as $4,100.
The lawsuit alleges the company's failure to obtain a $10,000 surety bond, failing to provide legally required disclosures on contracts and failure to provide copies of a notice of cancellation form for buyers. The Indiana attorney general's office is seeking customer restitution totaling $19,176 and penalties and costs of up to $5,500 per violation. (nmn22509)
MORAL
QUESTION: If the FTC can freeze assets without notice and that is a sure way to put people out of business, why don't the attorneys general do the same thing and sue the individuals as the FTC does? Interesting question, isn't it?
VIRGINIA HOME OWNER, THE BUYER, A MORTGAGE BROKER AND THE PRESIDENT OF NORTHERN VIRGINIA BANKRUPTCY BAR ASSOCIATION GUILTY OF BANKRUPTCY MORTGAGE FRAUD
FACTS
A jury convicted Richard A. Forde, formerly of Great Falls, Va., on charges of conspiracy, bankruptcy fraud and bank fraud for his participation in a mortgage scheme. Forde, the former president of a now-defunct Internet business known as tutornet.com, filed for bankruptcy in May 2001 and engaged in a bankruptcy fraud scheme from December 2001 to January 2004. Forde conspired with mortgage broker David Freelander and attorney Leslie W. Lickstein, former president of the Northern Virginia Bankruptcy Bar Association, to sell Forde's Great Falls home in 2002 for almost $6 million and keep millions in proceeds from that sale from Forde's bankruptcy estate.
The alleged scheme involved the filing a false lien against the Great Falls property, which was paid off at the closing of the sale, with the money going to Forde's benefit instead of to his creditors. Forde's sale of the Great Falls property to buyer Alladean Allobaidy was financed, in part, by a $1.5 million promissory note from Allobaidy to Forde. Allobaidy's periodic payments on the note were supposed to have gone to Forde's creditors in bankruptcy. Instead, in an alleged side deal, Allobaidy agreed to let Forde continue to reside at the Great Falls property rent free in exchange for not having to make those periodic payments. Forde also lied in a deposition conducted by the bankruptcy trustee, who was investigating the case and also suborned the perjury of another witness.
Forde committed bank fraud in connection with a $3.9 million first mortgage that Allobaidy obtained from Lehman Brothers Bank in order to buy the Great Falls property. The bank fraud scheme involved an alleged side deal between Forde and Allobaidy in which a "slush fund" was created from which Allobaidy's monthly mortgage payments to Lehman Brothers Bank were made.
The funds, which came from the Lehman Brothers Bank mortgage, were ostensibly to be used by Allobaidy to pay move-in and fix-up expenses in connection with the purchase of the home, but were actually used by Forde for personal expenses and to pay Allobaidy's mortgage. As a result of the side deal, which was not disclosed to Lehman Brothers Bank, the bank made a larger loan to Allobaidy than would otherwise have been permitted by its internal underwriting guidelines. The indictment also alleged that Forde knowingly signed a false HUD-1 closing statement, which was sent to Lehman Brothers Bank after the closing.
When the mortgage later went into default, a Lehman Brothers Bank affiliate took back the property and sold it at a loss of approximately $1.1 million.
Freelander was sentenced in September 2008 to 48 months in federal prison, followed by three years supervised release and ordered to pay $5.44 million in restitution. Lickstein was sentenced in August 2007 to 12 months and one day in federal prison, followed by three years supervised release and ordered to pay $1.11 million in restitution. Allobaidy was sentenced in April 2007 to 15 months in federal prison, followed by three years supervised release and ordered to pay $1.11 million in restitution. (nmn22509)
MORAL
Lawyer. Four years of college. Three years of law school. Three days to take a bar exam and pass before he can practice law. With a felony conviction probably already disbarred. No good outlook for a decent job. Disgraces family. Why?
IF YOU DO FHA HECM LOANS DO NOT HIRE INSURANCE AGENTS AS EMPLOYEES
FACTS
Section 255 (n)(1) provides that a HECM mortgage originator or any other party that participates in the origination of a FHA insured HECM mortgage shall (1) not participate in, or be associated with, or employ any party that participates in or is associated with, any other financial or insurance activity; OR (2) demonstrate to the Secretary of HUD that the mortgagee or other party maintains, or will maintain, firewalls and other safeguards designed to ensure that (i) individuals participating in the origination of a HECM mortgage have no involvement with, or incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under this section, to purchase any other financial or insurance product.
Before providing definitive guidance on Section 255 (n)(1), FHA intends to seek comments from the public, including consumer groups, industry participants and other interested parties through appropriate administrative means. FHA advises that mortgagees must not condition a HECM mortgage on the purchase of any other financial or insurance product, and should strive to establish, consistent with the new law, firewalls and other safeguards to ensure there is no undue pressure or appearance of pressure for a mortgagor to purchase another product of the mortgage originator or mortgage originator's company.
Mortgagee Letter 2008-14, which provided guidance regarding the ways in which a non-approved entity or third party may participate and be compensated, is rescinded, effective on Oct. 1, 2008. Beginning with case number assignments made on or after that date, only FHA-approved mortgagees, as described above, may participate and be compensated for the origination of HECMs to be insured by FHA. (ml08-24)
MORAL
The short version is: You COULD HAVE loan officers doing conventional loans with insurance licenses and do the insurance in a separate room that does not have independent access to the FHA side where HECM loans are done. The borrower then could arguably go to the second office by going out and going to the second office. While I could defend this position, I heartily do not recommend you sell insurance in the same company. The second part is non-FHA approved mortgagees can no longer be compensated for any reason involving FHA HECM loans.
STRAW BUYER IN CALIFORNIA SENTENCED FOR FELONY MORTGAGE FRAUD
FACTS
United States District Judge William B. Shubb Jr. sentenced MANPREET SINGH of Stockton, Calif., to six months of home detention and five years' probation for mail fraud for her part in a mortgage fraud scheme. As a special term of probation, she was ordered to pay $1,000 a month in restitution to the victim of her mortgage fraud scam. And she was also ordered to pay $163,500 in restitution. She pleaded guilty on March 31, 2008.
According to Assistant United States Attorney Kyle, SINGH purchased two homes as a straw buyer for IFTHIKAR AHMAD, a co-defendant in the case. Straw buyers are loan applicants who purchase homes on behalf of others with no intention of actually occupying the property. In exchange for the use of their name and credit information, straw buyers are often compensated. In this case, SINGH received $15,000 from Ahmad for her role in signing falsified loan documents. In the first transaction, SINGH stated that she earned more than $5,500 per month.
In the second, SINGH stated that she earned $8,500. In truth, SINGH worked at Alfalfa's Pizza in Stockton and made approximately $8 an hour. As a result of her fraudulent transactions, the homes purchased with SINGH as the straw buyer were foreclosed on, causing a loss to the lender of $163,500.
Judge Shubb, in sentencing the defendant, said that SINGH got herself involved in something where the only possible outcome was to end up in federal court. Judge Shubb told the defendant to remember that, even though she was involved in a serious crime that deprived people of money, she "got a break." (usattyedca22009)
MORAL
She did. Look at the straw buyer from Florida below that is doing 27 months in a federal prison for two homes. She could have done hard time in federal prison.
FIVE INDICTED FOR MORTGAGE FRAUD IN SACRAMENTO
FACTS
DENNIS AARON MOORE, of Hillsborough, Calif., VERONIKA WRIGHT, of San Ramon, Calif., MITCHELL WRIGHT, of San Ramon, Calif., HAIYING FAN, of Millbrae, Calif., and GARY LORENZO GEORGE, of Olivehurst, Calif., have all been charged in an eight count indictment alleging their participation in a mortgage fraud scheme with respect to the purchase of a series of homes in South Lake Tahoe and Nevada City, Calif. Each defendant is charged with one count of conspiring to commit bank fraud and mail fraud; defendants MOORE, VERONIKA WRIGHT, MITCHELL WRIGHT, and FAN are further charged with two counts of bank fraud; and MOORE, VERONIKA WRIGHT and GEORGE are each charged with making false statements on loan applications. MOORE and FAN are also charged with two counts of money laundering. The indictment alleges that the victim lending institutions suffered over $1,000,000 in losses.
The indictment alleges that between June 2005 and April 2007, the defendants conspired to defraud Washington Mutual Bank, doing business as Long Beach Mortgage, Countrywide Bank, FSB, and other lenders through a "cash-back-to-buyer" mortgage fraud scheme. MOORE purchased five separate properties in South Lake Tahoe and Nevada City, each of which was funded with large primary loans or first mortgages from various lending institutions. It is alleged that as part of each purchase agreement, MOORE insisted that each seller agree that a substantial commission -- sometimes in excess of 20% of the purchase price -- be paid from the sale proceeds to MOORE's real estate agent, defendant FAN. In order to induce the seller to agree to such a commission, MOORE often offered to purchase the properties at prices above the respective list prices.
MOORE further collaborated with his mortgage broker, VERONIKA WRIGHT, and his other co-conspirators to submit to the lending institutions home mortgage loan applications that contained various false statements with respect to MOORE's income, employment, liquid assets, and compliance with tax obligations. MITCHELL WRIGHT is alleged to have created a bogus Web site to substantiate MOORE's false employment claims, and GEORGE, a tax professional, created false letters to support MOORE's false financial claims. The banks relied on these false statements in disbursing funds pursuant to the loans. It is further alleged that once the funds were disbursed, FAN kicked back the majority of her "commission" to MOORE, completing the cashback-to-buyer mortgage fraud scheme.
The maximum statutory penalty on the conspiracy charge is five years in prison, while the bank fraud and false statement charges carry a 30-year maximum sentence. The maximum sentence that can be imposed with respect to the money laundering charges against MOORE and FAN is 10 years in prison.
The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt. (usattyedca22009)
MORAL
Read the Maryland matter below about forfeiting all property and then think of how much money it costs to defend a case with a lot of "paper." Think of each loan file and other documents in the various loans plus the subpoenas served by the federal investigators and you are talking about reviewing over 5,000 pages in the event the matter goes to trial. Now think of the legal costs to review the documents.
COLORADO INCREASES DEDUCTIBLE ON ERRORS AND OMISSIONS INSURANCE FOR REVERSE MORTGAGES
FACTS
Effective Feb. 2, 2009 the deductible on E&O insurance for Reverse Mortgages of $100K/$300K is increased to $21,000. The Division of Real Estate has discovered the insurance in this category is available and more affordable by $650.00. (emrule4ccr725-3)
MORAL
Be certain you have the insurance or the Commissioner will be certain to discipline your license.
COLORADO MORTGAGE BROKERS MUST NOTIFY BORROWERS IF THEY ARE ALSO ACTING AS THE REAL ESTATE BROKER IN THE TRANSACTION
FACTS
Colorado statutes require mortgage brokers, before providing mortgage services to the borrower, to disclose all facts material to the transaction. Individuals who operate with dual status licenses as real estate brokers and mortgage brokers shall disclose this fact to the borrower. You will use the new "Colorado Dual Status Disclosure Form" that notifies borrowers of an individual's dual status and of their right to shop for alternate services. The borrower will be given this form within three business days of giving you a loan application or any money, whichever occurs first in time. You shall maintain the form for four years. (4ccr 725-3;7-1-1)
MORAL
As if you do not have enough disclosure forms already. Play a game with me. You have been in the industry for over four years. Without looking at a book or file, name every single mortgage disclosure statement required by Colorado, HUD, RESPA, TILA, ECOA, FHA.
FLORIDA STRAW BUYER DRAWS 27 MONTHS IN FEDERAL PRISON
FACTS
Defendant Samuel Morejon was sentenced on Feb. 19, 2009 to 27 months in federal prison, to be followed by three years of supervised release, for his participation in a mortgage fraud scheme. The restitution to be paid by Morejon will be set on March 18, 2009.
Morejon pled guilty in December 2008 to one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. §1349, and two counts of wire fraud, in violation of 18 U.S.C. §1343. Morejon was arrested in November 2008 for participating in the fraudulent sale of residential property located in Coral Gables and Miami. The Coral Gables property was flipped three times within about two years, more than doubling the price of the property from $550,000 to $1,200,000. Morejon served as the straw buyer in the second sale of this property and submitted false loan applications to obtain $850,000 in financing to purchase the property. Once the final sale closed, the individual posing as the buyer in the third sale, co-defendant Jose Martinez, failed to make a single payment on the mortgage, and the property ultimately went into foreclosure.
At the same time Morejon posed as a buyer for the Coral Gables property, he served as a straw buyer in the purchase of another residential property in Miami. Based on fraudulent misrepresentations in the loan application, Morejon obtained $835,000 of financing to purchase this property. He never made a single payment on the mortgage, and the property went into foreclosure resulting in a significant loss to the lender.
This case was investigated by agencies participating in the Federal-State Mortgage Fraud Strike Force, including the Federal Bureau of Investigation, the U.S. Secret Service, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development, the State of Florida Office of Financial Regulation, and the Miami-Dade County Police Department. (usattysodistfl22009)
MORAL
Two homes, one straw buyer for two and two years in prison for the straw buyer. Funny thing about a restitution order. The entire loss for the scheme is the restitution ordered for ALL the participants. The court does not divvy the loss up. Now remember the forfeiture we discussed about Maryland below and you wonder if the gentleman will have a home left. Next remember all the agencies cooperating in Maryland below? In this case there were six agencies.
FLORIDA ATTORNEY PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Defendant JOHN A. YANCHEK, a resident of Sarasota, Fla., and a practicing attorney, pleaded guilty before Magistrate Judge Thomas B. McCoun III to three counts of a 47-count indictment charging four individuals with conspiracy, making false statements in connection with bank loans, scheming to defraud several FDIC-insured banks, and money laundering.
YANCHEK pleaded guilty to Count One, which charged him with conspiracy. The maximum penalty on that count is five years imprisonment and a $250,000 fine. YANCHEK also pleaded guilty to Count Four, which charged him with making false statements to a federally insured bank in connection with a commercial loan. The maximum penalty on that count is 30 years imprisonment and a $1-million fine. Finally, YANCHEK pleaded guilty to Count 36, which charged him with money laundering. The maximum penalty on that count is 10 years imprisonment and a $250,000 fine.
YANCHEK entered into a conspiracy to make false statements to federally insured banks in connection with applications for commercial loans to fund the purchase of vacant land in the Sarasota/Manatee area for development. The object of the conspiracy was to obtain a loan from a bank in an amount that was sufficient to allow the conspirators to purchase the property without contributing any equity of their own and to receive excess loan proceeds for their personal use and benefit. To influence the lending decision of the various banks, YANCHEK, acting in his legal capacity as the closing attorney, made false statements regarding the financial resources of the borrower, the amount and source of equity contributed by the borrower, compliance with the seller's obligation to provide marketable title to the property, and distribution of the loan proceeds.
The total face amount of the commercial loans fraudulently obtained from seven banks was $82.7 million. Co-defendant MICHAEL A. TRINGALI pleaded guilty to the conspiracy charge on November 3, 2008. TRINGALI is awaiting sentencing. (usattmdfl2409)
MORAL
1. It is a lot of money. 2. He did not get to keep it all or get it all. 3. Spends four years in college, three years going to law school, 3 days to take a bar exam and get licensed and now goes to prison, loses his license, shames his family and will probably never hold a decent job again for the remainder of his life. You wonder why he did it. And now to follow-up a continuation of this same story and add more actors.
FLORIDA MAN FOUND GUILTY AFTER TRIAL FOR MORTGAGE FRAUD AND FACES 135 YEARS IN A FEDERAL PRISON
FACTS
A federal jury today found LARRY P. NARDELLI, of Tampa, guilty of six of eight counts in which he was named as a defendant in a 47-count indictment. The maximum penalty NARDELLI faces is 135 years' imprisonment and a $4.5 million fine. The sentencing hearing is scheduled for June 15, 2009.
NARDELLI was indicted on July 24, 2008, along with three other co-defendants. NARDELLI, operating through Bay Area Holdings Group and Elba International, entered into several bogus purchase/sale contracts with co-defendant MICHAEL A. TRINGALI, operating through G & T Land Development. They pretended that NARDELLI had made down payments totaling $21.5 million to purchase properties owned by TRINGALI, all for the fraudulent purpose of providing an apparent source of funds which TRINGALI, in applying for loans at federally insured banks, could point to as equity to be contributed toward the purchase of three of the seven properties described in the indictment.
The evidence established that the conspirators created a scheme in which they agreed that co-defendant NEIL MOHAMED HUSANI, operating through Capital Force, Inc., would enter into a contract with a seller to purchase vacant land in the Sarasota area and then would immediately flip the property to co-defendant TRINGALI at approximately double the price. Co-defendant TRINGALI then applied for a loan at a federally insured bank to obtain funding for the purchase. Relying on the sham contracts entered into with defendant NARDELLI, TRINGALI falsely represented to the various banks that he had the required equity, typically approximately 35% of the value of the land, to contribute toward the purchase of the property. TRINGALI also submitted false financial information about himself and his company. Co-defendant JOHN A. YANCHEK, in his capacity as the closing attorney for the conspirators, prepared false escrow letters and closing documents. As a result of the criminal activities of the conspirators, the victim banks loaned TRINGALI monies totaling approximately 140% of the value of the land. The conspirators purchased the vacant land from the seller and distributed the excess funds among themselves in various amounts. Ultimately, TRINGALI was unable to pay off the loans. On Feb. 4, co-defendant YANCHEK, of Sarasota, a practicing attorney licensed by the State of Florida, pleaded guilty to three counts charging him with conspiracy, making false statements to a federally insured bank in connection with loan, and money laundering. He is awaiting sentencing. See story immediately above this one. No date has been set. On Nov. 3, 2008, co-defendant TRINGALI, of Sarasota, pleaded guilty to conspiracy to make false statements to federally insured banks in connection with loans, to commit bank fraud, and money laundering. TRINGALI is scheduled to be sentenced on March 9, 2009.
Co-defendant HUSANI, formerly of Sarasota, is a fugitive who was recently arrested in Jordan. Efforts are underway to have him extradited back to the Middle District of Florida to be prosecuted.
The total face amount of the commercial loans fraudulently obtained from seven banks was $82.7 million. (usattymdfl21909)
MORAL
Who is worried about a multi-million dollar fine and/or restitution order when faced with a potential hotel room for 135 years? Of course there is limited access and mobility.
YOU THINK MARYLAND AND OTHER STATES ARE NOT SERIOUS ABOUT PROSECUTING MORTGAGE FRAUD AND FORFEITING YOUR PROPERTY?
FACTS
U.S. Attorney Rod J. Rosenstein said, "Local, state and federal regulatory and investigative agencies are working to coordinate our mortgage fraud enforcement actions, identify appropriate cases for investigation and devote resources to pursue them. Today the Maryland Mortgage Fraud Task Force received briefings about recent cases in which we have pursued civil and criminal remedies for mortgage fraud, and we developed plans to hold even more con artists accountable and deter mortgage fraud in the future. We are going to seize cash, bank accounts, jewelry, artwork, houses, cars, boats and other assets that were purchased with ill-gotten gains, and return the money to the victims."
NOW IN MARYLAND WHO IS GOING TO DO ALL THIS? LOOK AT THE LIST
Maryland Department of Labor, Licensing & Regulation
Maryland Office of the Attorney General
Maryland Insurance Administration
Maryland Department of Human Resources
Maryland State Police
State's Attorney's Office for Baltimore City
State's Attorney's Office for Baltimore County
State's Attorney's Office for Montgomery County
State's Attorney's Office for Prince George's County
United States Attorney's Office for the District of Maryland
Federal Bureau of Investigation
Inspector General, Social Security Administration
Inspector General, U.S. Department of Housing & Urban Development
Inspector General, U.S. Department of Veterans Affairs
Internal Revenue Service, Criminal Investigation Division
U.S. Postal Inspection Service
U.S. Secret Service
These are 17 agencies in one state. Now think of all the other states doing it. (usdojmd22009)
MORAL
Stop doing mortgage fraud if you have done it in the past. If you have done it in the past, see your lawyer now or you may be broke later.
TEXAS WOMAN SENTENCED TO OVER SIX YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
Veronica DeGuzman was sentenced to 75 months in federal prison for carrying out a mortgage fraud scheme involving three San Antonio and Spring Branch residential properties, three financial institutions and over $1,000,000 in foreseeable losses. In addition, United States District Judge Xavier Rodriguez ordered that DeGuzman pay $1,665,000.00 restitution to her victims and be placed under supervised release for a period of five years after completing her prison term.
On Oct. 2, 2008, Veronica DeGuzman pleaded guilty to one count each of financial institution fraud and aggravated identity theft. Her husband, Fred De Guzman pleaded guilty to the same charges on Nov. 18, 2008. Sentencing for Fred DeGuzman is set for March 20, 2009.
By pleading guilty, the defendants admitted that from June 25, 2007, to Nov. 5, 2007, Fred DeGuzman, using an alias, and Veronica DeGuzman contacted individual sellers of residential property and enter agreements to purchase the property for an inflated price, with the excess of the stated price over the actual sales price being returned to a corporation owned and controlled by the defendants. Using the alias, as well as falsified employment and income information, Fred and Veronica DeGuzman applied for and obtained 100% financing. After one or two mortgage payments, the mortgage went into default causing losses to the lenders. (usattywdtx22009)
MORAL
The family that plays together, stays together . . . in different hotels, that is.
WEST VIRGINIA MAN PLEADS GUILTY TO BANKRUPTCY FRAUD
FACTS
CLINTON LEE SMITH, formerly of Huntington, W.Va., pled guilty on Feb. 17, 2009 to bankruptcy fraud. In November 2008, a Federal grand jury sitting in Charleston, West Virginia returned a three-count indictment against Smith charging him with bankruptcy fraud, concealment of assets, and making a false declaration in a bankruptcy proceeding. An investigation conducted by the Federal Bureau of Investigation revealed that Smith failed to disclose the transfer of property or to list income received from the sale of property on his Chapter 7 bankruptcy petition. Smith admitted that in January 2003, he received approximately $103,000 from the sale of fifty acres in Cabell County. Specifically, Smith received $11,000 at closing and was to receive $2,000 monthly until the loan was paid in full. As part of his plea agreement, Smith stipulated he lied under oath at a bankruptcy meeting of creditors by claiming his ex-wife received the property in their 2001 divorce. Smith faces up to five years in prison and a $250,000 fine when he is sentenced on May 26, 2009. (usattysodtwva21809)
MORAL
A small amount of money. A very large lie to his attorney and now no voting rights, no rights to certain licenses, no right to run for public office and the shame he has brought to his children, if any. Tell the lawyer the truth and he truthfully advises you. Tell the lawyer a lie or do not tell him everything and the lawyer's advice can be worthless.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
