FEDERAL TRADE COMMISSION SUES FEDERAL MODIFICATION LAW CENTER OF IRVINE, CALIFORNIA, AND ITS MANAGING PARTNER FOR MISREPRESENTATION IN MORTGAGE LOAN MODIFICATIONS ALONG WITH NATIONAL FORECLOSURE RELIEF INC. AND OTHERS IN SEPARATE LAWSUITS
FACTS
Federal officials are investigating 2,100 companies they believe are taking advantage of homeowners in foreclosure. The Federal Trade Commission has filed one such action against an Irvine company as well as three others.
Federal Trade Commission chairman Jon Leibowitz said that his agency had targeted firms like the Federal Loan Modification Law Center in Irvine that allegedly sought through their names and advertising to suggest they were connected to the government. In the process the FTC has requested a court order to stop the marketing tactics of Federal Loan Modification, a private law firm that advertises nationally.
In pleadings filed in the United States District Court in Los Angeles, the FTC alleged that the firm charged $1,500 to $3,000 in upfront fees for its consumer programs, often promising it could help modify mortgages to make payments more affordable.
The FTC in its pleadings states consumers were told the firm had a success rate of over 90%. But the FTC alleged the firm did not obtain a mortgage loan modification or stop foreclosure in all or virtually all instances. However, the managing partner of the firm, Nabile Anz, who also was named as a defendant, said those allegations were not true. He said the firm, which went full time into the loan business in December, has picked up about 2,500 paying clients a month. He alleges about 20% have gotten loan modifications and their files are closed.
The one charge Anz said might be valid is the firm name, which the FTC alleged made it sound as if the firm was part of, affiliated with or endorsed by the United States government or one or more federal government programs.
In February 2009, the FTC sued National Mortgage Relief Inc. and three individuals as well and requested the assets be frozen in Los Angeles for misrepresentation. The complaint requests disgorgement of profits and refunds to consumers and is still pending. The case number is 8:09-cv-00117-DOC-MLG if you would like to follow it in Pacer.
The FTC sent out warning letters to 71 additional companies that appeared to be marketing deceptive loan modification or foreclosure relief plans.
MORAL
I want you to notice the lawsuits are not just against the corporations but the individual owners are named as well. You have to ask yourself "Do you feel lucky?" Even lawyers are not exempt from being sued for misrepresentations about loan modifications. Whether it is true or not remains to be seen but how would you like to be an attorney defending yourself against the FTC?
IN ILLINOIS TWO CHICAGO COMPANIES SUED FOR FALSE PROMISES ON LOAN MODIFICATIONS IN ADDITION TO 24 OTHERS
Illinois attorney general Lisa Madigan has waged a high-profile campaign against mortgage scams. She announced lawsuits against two Chicago-area companies that have been advertising on local Spanish-language radio stations. She states that she has brought lawsuits against 24 companies accused of running fraudulent mortgage assistance schemes in Illinois.
Madigan filed lawsuits against Centurion Loss Mitigation Group in Chicago and its owner, Carlos A. Gomez, and Cash VIP in Melrose Park, Ill., and owner Fernando Rios. The lawsuits allege that Centurion charged a $1,500 upfront fee and Cash VIP a $625 upfront fee but did not negotiate or perform any other services for homeowners.
TWENTY-FOUR INDIVIDUALS IN SAN DIEGO INDICTED FOR MORTGAGE FRAUD OVER 220 PROPERTIES COSTING $100 MILLION PLUS
FACTS
United States attorney Karen P. Hewitt on April 7 announced an indictment charging 24 individuals with conspiracy to conduct enterprise affairs through a pattern of racketeering activity (RICO). Specifically, the defendants are charged with using a corrupt enterprise to conduct a pattern of racketeering activity, namely, wire fraud, bank fraud and money laundering. The charged racketeering activity all stems from an extensive mortgage fraud scheme based in San Diego that involved 220 properties with a total sales price of more than $100 million.
The lead defendants charged with running the corrupt enterprise are Darnell Bell, a k a D-Bell, Michael Ivy, Stanley Gentry and Billie Bishop. The indictment alleges that Bell was the leader of the corrupt enterprise and that he received at least $9 million in proceeds from the racketeering conspiracy. Ivy was primarily responsible for negotiating the purchase of real estate on behalf of the enterprise. Gentry, a licensed real estate broker, allowed the corrupt enterprise to use his broker's license to facilitate the fraudulent purchase of property in exchange for a $10,000 monthly payment and a percentage of the real estate commission and broker's fees associated with each fraudulent purchase.
Bishop was an escrow officer who facilitated the fraudulent purchase of more than 100 properties on behalf of the enterprise.
The indictment alleges between January 2005 and at least April 2008, the defendants used multiple real estate businesses, including the Ivy House Inc., the Real Estate Center of Southern California and the Real Estate Center of La Mesa, to facilitate the fraudulent purchase of real estate. In general terms, the scheme charged in the indictment worked as follows:
Defendants identified properties for sale in Southern California that had been on the market a long time and where the original asking price had been reduced.
Defendants used "straw buyers" who allowed their names and credit histories to be used to obtain mortgage loans and purchase properties in name only.
Defendants prepared and submitted offers to purchase the identified properties that substantially exceeded the asking price for those properties.
Defendants hired real estate appraisers, including co-defendant Esteban Valenzuela, to prepare inflated appraisals for the identified properties. The inflated appraisals were then used to fraudulently induce lenders to believe that the loans being given to the "straw buyers" would be fully secured by the value of the properties being purchased.
Defendants prepared and submitted false loan applications for the "straw buyers" to induce lenders to make loans to persons and at terms that the lenders otherwise would not have funded.
Defendants prepared and submitted false documents and information in response to lender verification inquiries, including "CPA letters," verification of employment forms, verification of rent forms and "discrepancy letters."
The "straw buyers" purchased the identified properties with mortgages amounting to 100% of the purchase price of the property, ensuring that the defendants did not have any money at risk in the fraudulent transactions.
Defendants arranged to have the amount of money that exceeded the asking price paid at the close of escrow to a shell construction company.
Defendants falsely informed the lenders that the "kickback amount" would be used to pay for handicap accessing and property upgrades to the identified properties, falsely inducing the lenders to believe that the entire loan amount would be secured by the value of the identified properties.
Based upon the investigation to April 7, none of the properties that were purchased had any handicap accessibility or property upgrades performed by the defendants' shell firm, Bell Construction.
Defendants disbursed the "kickback amount" to members and associates as payment for participation in the fraudulent scheme.
The "straw buyers" subsequently failed to make the required mortgage payments for the fraudulently purchased properties, which resulted in the properties' being foreclosed and the lenders' suffering severe financial losses.
The indictment also charges that several real estate professionals were members of the racketeering conspiracy, including Diana Jaime, a public notary, Jorge Cortez, a licensed real estate agent, Esteban Valenzuela, a licensed real estate appraiser, Anton Ewing, a certified public accountant, and Randolph Hirsch and Dennis Tapia, registered tax preparers.
Latashia McKinney and Marcus Dozzell, a k a Kali, recruited individuals to obtain fraudulent mortgage loans and purchase properties on behalf of the corrupt enterprise. Lorena Callu was employed by the corrupt enterprise and facilitated the fraudulent purchase of real estate by, among other things, preparing and submitting false loan applications.
Desiree Holiday, Dexter Holiday, Keith Holiday, Gerard Holiday, Ray Logan, a k a Jack Nasty, David Lewis, Joseph Lewis, Stevie Frazier, Jorge Magana, Nicoele Watson and Daniel Williams are all alleged to have fraudulently obtained mortgage loans and purchased properties on behalf of the corrupt enterprise.
Bell was arraigned on the indictment earlier on April 7. Twenty-three individuals were arrested by agents of the FBI and IRS earlier on April 7 and are expected to make their initial appearances on April 8.
SUMMARY OF CHARGES
Title 18, United States Code, Section 1962(d) -- conspiracy to conduct enterprise affairs through a pattern of racketeering activity; Title 18, United States Code, Section 1963 -- criminal forfeiture. The charged pattern of racketeering activity includes violations of Title 18, United States Code, Section 1343 (wire fraud); Title 18, United States Code, Section 1344 (bank fraud); Title 18, United States Code, Sections 1956(h) and 1957 (conspiracy to launder money); Title 18, United States Code, Section 1957 (money laundering).
Maximum Penalties: 20 years incarceration, a fine of $250,000, three years of supervised release
MORAL
So you want to play with 1003s? Well this is the risk. These were caught and remember they are innocent until proven guilty and boy is it expensive to try to stay out of federal prison. Do you know any of them? If so, have you been involved in any games? If so, then see your attorney now because these were arrested today and some will cooperate in the investigation. Take my word for it.
FTC SUES FOURTEEN ENTITIES AND INDIVIDUALS COMBINED SEEKING INJUNCTIVE AND OTHER RELIEF RELATING TO LOAN MODIFICATIONS
FACTS
According to the FTC's complaint, filed in the District of Columbia, defendant Thomas Ryan of Newport Beach, Calif., used a foreign Internet registrar to falsely register two sites, bailout.hud-gov.us and bailout.dohgov.us. The sites were used to entice financially strapped consumers to seek mortgage loan modification services under the guise that the services were associated with, or were actually, the U.S. government, including HUD and the Treasury Department. The FTC alleges that the defendant misled consumers nationwide. A federal district court granted the FTC's motion for a temporary restraining order, which required the Internet Service Provider hosting the sites to immediately remove them from the Internet. The FTC and the defendant stipulated to a preliminary injunction prohibiting him from holding himself out as an agency of any U.S., state, or local government, or as being affiliated with any such agency. The case is in the District of Columbia Federal Court but Mr. Ryan appears to live in Newport Beach.
Home Assure d/b/a Expert Foreclosure. Filed in the U.S.D.C. Middle District of Florida. In this case, the FTC alleges that the defendants promise consumers facing imminent home foreclosure that they can stop the foreclosure, regardless of the amount the consumer owes his or her lender. The defendants are charged with falsely claiming that they have special relationships with lenders, have helped thousands of consumers avoid foreclosure, and will provide a 100% satisfaction money-back guarantee. They typically charge consumers an upfront fee of $1,500 to $2,500 but, the FTC alleges, do little or nothing to help them avoid foreclosure and fail to give refunds when foreclosures are not stopped.
I would like you to notice they are suing the individual officers and directors and not just the corporation.
HOPE NOW MODIFICATIONS LLC, HOPE NOW FINANCIAL SERVICES PERMANENT CORP., d/b/a Hope Now Modifications, NICK PUGLIA and SALVATORE PUGLIA. On March 24, the FTC announced two related cases alleging that the defendants misled consumers about their ability to provide mortgage loan modification and foreclosure relief, and misrepresented that they were affiliated with or part of the Hope Now alliance, the nonprofit, HUD-endorsed organization that is a broad-based coalition of credit and home ownership counselors, lenders, and other mortgage market participants. In each case, the court issued a temporary restraining order with an asset freeze and set dates for a preliminary injunction hearing. The New Jersey attorney general also filed state court actions against both sets of defendants and those cases are in litigation.
MORAL
Notice how the FTC is naming the individual officers and directors of the corporations such that the corporation veil cannot protect them. In several other cases they have sued the loan officers as well. If you would like to avoid trouble with the FTC, let alone the agency that licenses you, I suggest you seek competent advice from your legal counsel.
DO NOT FILE YOUR FEDERAL INCOME TAX RETURNS FOR TWO YEARS AND GO TO FEDERAL PRISON
FACTS
Travaris Meeks, 34, of Rochester, N.Y., pled guilty in April 2009, to two counts of failing to file federal income tax returns in front of U.S. District Judge Charles J. Siragusa, acting U.S. attorney Kathleen M. Melhtretter of the Western District of New York announced on April 2, 2009. These violations each carry a maximum of one year in prison.
For the years 2002 and 2003, Meeks earned taxable income from his clothing store business, Mad Flavors, located at 185 Lyell Ave. in Rochester. Despite earning substantial income, Meeks failed to file federal income tax returns for 2002 and 2003. Specifically, for 2002, Meeks failed to report approximately $96,468 in income, resulting in a tax owing to the IRS of $32,094. For, 2003, Meeks failed to report $96,015 in income resulting in a tax due and owing to the Internal Revenue Service of $30,932.
Meeks also agreed to forfeit the $160,000 which had been seized by the government. This money will be used to satisfy Meeks' outstanding tax liability, which, with penalties and interest, totals $160,000. Sentencing for Meeks is scheduled for July 17, 2009.
MORAL
He could have filed and negotiation installment payments. Now he is negotiating how much time he will spend or not spend in a federal prison. If you have not filed tax returns for prior years and have taxable income we can help protect you from the same thing provided you contact us before you are contacted by federal agents. However, if they contact you first, then there is very little anyone can do for you as you can see above.
ARIZONA REAL ESTATE INVESTOR AND LOAN OFFICER ARRESTED FOR MORTGAGE FRAUD
FACTS
On April 8, Dustin Michael Thompson, 30, and Sean Paul McLaughlin, 29, were indicted on four counts of wire fraud and one count of conspiracy to commit wire fraud as a result of their involvement in a cash back mortgage fraud scheme.
Thompson was arrested on March 13, 2009 in Las Vegas on a criminal complaint and is detained pending trial. McLaughlin received a summons to appear in federal court on the charges. The case against the pair is based on an investigation which alleges that from Oct. 19, 2005 through June 5, 2007 they conspired to commit mortgage fraud in the Phoenix area. Thompson and McLaughlin submitted mortgage loan applications on behalf of buyers that included friends and family members, containing false information.
Following the funding of the loans, Thompson and McLaughlin received cash back that they used for personal expenses and to perpetuate the scheme. Most of the homes purchased during the conspiracy have foreclosed.
A conviction for each count of wire fraud and conspiracy to commit wire fraud is punishable by a maximum term of 30 years in prison, a $1 million fine or both.
MORAL
I am willing to bet someone out there knows them. The question is, how well? Too well? Well, I know of excellent white-collar defense attorneys. Sure are a lot of "wells" in this moral.
OHIO BANKRUPTCY COURT DENIES RIGHT TO LIFT THE AUTOMATIC STAY TO ALLOW LENDER TO GO FORWARD WITH FORECLOSURE WHEN LENDER CANNOT PROVE IT OWNS THE DEED OF TRUST
FACTS
Green Tree Servicing LLC moves this Bankruptcy Court (No. Div. OH, E.D.) to reconsider its decision denying an amended motion for relief from stay to proceed with a state court foreclosure. Because, despite three chances, the movant has failed to show that it holds a perfected security interest in the debtors' residence that would allow the movant to foreclose on the property in state court, the motion is denied.
A creditor with a perfected lien interest in collateral owned by a debtor who has defaulted on an obligation to that creditor is generally entitled to relief from stay to pursue its remedies in state court. The United States Bankruptcy Court for the Northern District of Ohio adopted uniform forms for certain standard filings, including motions for relief from stay in Chapter 13 cases in which a secured creditor seeks to foreclose its lien interest outside of the bankruptcy court. (See General Order 99-1.) The relief from stay form requires the movant to provide evidence of these critical components of the claim: the original transaction, perfection of the lien interest, any transfers of the interest.
To prove that the movant is the real party in interest, the nature of the debtor's default or other grounds supporting relief, and the names of any other parties with an interest in the collateral so that they have notice and an opportunity to be heard with respect to the motion. The worksheet requires the movant to provide additional details about the total indebtedness, post-petition amounts owed by the debtor, the collateral and its fair market value, and other loan data. Each movant is expected to provide complete information showing it is entitled to relief at the time the motion is filed.
WHAT ACTUALLY HAPPENED WITH THIS LOAN?
On Dec. 7, 1995, the Dimmings entered into a Home Improvement Retail Installment Contract and Security Agreement (the contract) with Quality Remodelers to finance the purchase of windows for their house. The contract stated that the Dimmings were giving Quality Remodelers a security interest in the windows and in the Dimmings' residence. The Dimmings agreed to pay $ 11,101.80 to Quality Remodelers at 12.99% interest, in 300 monthly payments of $125.13. The payment due date is stated as "Monthly Beginning Approximately 30 Days from Disbursement Date." First payment may be slightly larger/smaller due to a longer/shorter payment period.
Then Quality Remodelers assigned the contract to Green Tree Financial Servicing Corp.
The Dimmings also gave Quality Remodelers an open-end mortgage on their home to secure their obligations under the contract. THERE IS NO EVIDENCE THAT EITHER QUALITY REMODELERS OR GREEN TREE FINANCIAL SERVICING CORP. PERFECTED THE SECURITY INTEREST GRANTED BY THE MORTGAGE BY FILING IT WITH THE COUNTY RECORDER.
A party seeking relief from stay to pursue a security interest in collateral must show that it has an interest in that collateral at the time the motion is filed. (See General Order 99-1; see also in re Foreclosure Cases, No.1:07CV2282, 2007 U.S. Dist. LEXIS 84011, 2007 WL 3232430; N.D. Ohio Oct. 31, 2007.) (Noting that lenders in foreclosure actions are required to demonstrate that they hold and own the mortgage as of the filing of the complaint in foreclosure.) The documents attached to the amended motion do not meet that standard and fail to show that any entity had a perfected security interest in the real estate at issue. Quality Remodelers held a mortgage, but there is no evidence that it perfected its security interest by filing the mortgage with the county recorder's office. The documents show that Quality Remodelers transferred the contract and the mortgage to Green Tree Financial Servicing. There is no evidence, however, that Green Tree Financial Servicing perfected its security interest by recording it with the county recorder's office. (In re: RICHARD J. DIMMINGS and VICKIE R. DIMMINGS, Debtors.Case No. 07-18176, Chapter 13, U.S.B.C. NO. DIST. OHIO, E.D.; 386 B.R. 199; 2008 Bankr. LEXIS 991.)
Ohio Federal District Court dismissed seven cases because there was no proof the notes and deeds of trust had been assigned to the plaintiffs as of the date the complaint was filed by the party attempting to foreclose.
MORAL
File the papers correctly. Be sure the chain of title is in the record or the borrower may live their forever and never pay the mortgage.
OHIO APPRAISER AND SEVERAL OTHERS GUILTY OF MORTGAGE FRAUD
FACTS
After an eight-day trial on charges of mortgage fraud, Lavon Ivy of Orange Village, Ohio, an appraiser, was found guilty on all counts against her. Her father, John Ivy, also of Orange Village, who did rehab work on the house, their rehab company, PTOT Enterprises, along with a mortgage broker, Phillip Stevens, and his company, M&S Investments, were collectively found guilty of all 23 of the mortgage fraud offenses pertaining to a house at 25349 Tyron Rd., Oakwood Village, near Bedford, Ohio.
Lavon Ivy was the key defendant in this mortgage fraud scam that started with seven other defendants. She acted as an appraiser and dealmaker and fraudulently submitted an inflated appraisal of the property. Lavon Ivy's appraisal of $165,000 was inflated by at least $30,000, that she failed to disclose known violations and that she failed to disclose that she and her father and their rehab company got money at closing to repair the house.
In her deal-making role, Lavon Ivy was also found guilty of deceiving the lender to make a $132,000 loan by submitting false documents, including a bogus $165,000 purchase agreement, which was needed in order to match the bogus appraisal to obtain a larger loan for the buyer. The actual purchase price was $90,000 with the buyer to fix all of the housing violations.
MORAL
Notice now that the FBI and U.S. attorney are starting to chase after one fraud loan. Usually, the cases I am aware of the parents bring in the children. Notice how the daughter brought in her father to share in the glory.
ANDREW JOHN SMITH OF CLEVELAND, GEORGIA, DRAWS 3 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD -- CAUGHT THROUGH "STING"
FACTS
Andrew John Smith, 29, of Cleveland, Ga., was sentenced on April 9, 2009 by United States District Judge William C. O'Kelley to serve over three years in prison on a federal charge of conspiracy to commit bank, wire and mail fraud arising from a mortgage fraud scheme.
United States attorney David E. Nahmias is quoted as saying: "We will continue to use undercover `sting' operations to stop the closing of fraudulent loans before the proceeds are disbursed."
Smith was sentenced to three years, six months in federal prison to be followed by five years of supervised release. The court has ordered Smith to pay restitution but has not yet set a final amount. Smith pleaded guilty to the charge on Jan. 9, 2009.
In early 2007, Smith was employed as a part-time loan officer by United International Mortgage in Buford, Ga., when he originated a fraudulent loan for his own residence. Smith was later recruited by an UIM co-conspirator not named in the indictment to refinance UIM loans with other lenders, as well as to sell UIM foreclosed properties on which construction was not complete to unqualified straw borrowers funded by other lenders. Smith's own loan for his residence had been included in the UIM portfolio of nonperforming loans facing imminent foreclosure.
On June 9, 2008, Smith and his UIM co-conspirator were caught in an FBI/FDIC-OIG (Federal Deposit Insurance Corp.-Office of Inspector General) "sting" after Smith had arranged for the sales price of a Pendergrass, Ga., property to be inflated from $2 million to $4 million. Prior to his arrest, Smith submitted fraudulent documents to federally insured banks to arrange a $3.2 million purchase money mortgage loan to finance the purchase of the property. Smith then negotiated a side agreement with the sellers (who were, unbeknownst to Smith, cooperating with the FBI) for the secret kickback of $2 million to his shell company. Smith was arrested by federal agents at the property during a subsequent meeting to negotiate his multimillion-dollar kickback for the "deal."
The property at issue was sold for its true market value of $1.8 million immediately upon conclusion of the FBI's sting operation. The FBI investigation is ongoing.
MORAL
Notice haw the investigation is still ongoing? Meaning the "sting" operation? They did one of those back in 1991 in California. Is your state being stung? Do not do it. It is not worth the shame you bring to your family. If you did it, see your attorney now to mitigate the problem.
TEXAS LOAN OFFICER CONVICTED OF MORTGAGE FRAUD
FACTS
Nehemiah Jamal Douglas, 28, of Houston has pleaded guilty to mail and wire fraud conspiracy and money laundering charges as announced by U.S. attorney Tim Johnson. Douglas admitted to conspiring with others to defraud residential mortgage lenders by misstating facts relevant to the lending decisions.
Douglas worked as a loan officer at two Houston-area mortgage broker firms, Motown Mortgage Group and Central Capital Financial Group, where fraudulent loan applications and other fraudulent documents were prepared to induce mortgage lenders to provide 100% financing for homes the borrower's falsely claimed were to be their primary residences. Douglas himself purchased five homes using false and fraudulent information concerning his assets and liabilities and he recruited others to do the same.
A conviction for conspiracy to commit wire and mail fraud carries a possible maximum penalty of up to 20 years imprisonment and up to $250,000 fine. A conviction for conspiracy to commit money laundering through financial transactions involving criminally derived funds carries a possible maximum penalty of up to 10 years and a fine up to $250,000 or twice the amount laundered whichever is greater. Sentencing has been set for Oct. 26, 2009.
MORAL
Did you notice that stating the property is or will be your "primary residence" when it is not true is a felony?
WASHINGTON STATE HAS A FORM MODEL LOAN MODIFICATION AGREEMENT ALONG WITH AN INTERPRETIVE OPINION AS TO WHO MAY DO LOAN MODIFICATIONS AND UNDER WHAT CONDITIONS
FACTS
To see the Model Loan Modification Fee Agreement, go to
The interpretive opinion in a nutshell provides a person doing loan modifications for Washington residents involving their Washington real property must have a license unless exempt. Attorneys licensed as such by the state of Washington are exempt if not primarily doing loan modifications.
Companies and individuals offering loan modification services to Washington residents involving their Washington real property must be licensed under the Mortgage Broker Practices Act, Chapter 19.146 RCW, or Consumer Loan Act, Chapter 31.04 RCW, unless otherwise exempt under the language of those acts.
It is the director's position that individuals and companies taking the borrower's name, monthly income, Social Security number, property address, estimate of the value of the property, and any other information deemed necessary to provide a loan modification or negotiating residential mortgage loan terms are acting as mortgage brokers or loan originators and must be licensed under the MBPA or CLA unless specifically exempt from those acts.
Attorneys who represent Washington residents in matters involving real property in Washington must be licensed to practice law in Washington. The attorney exemption from the MBPA is limited. The exemption applies only to attorneys licensed in Washington "not principally engaged in the business of negotiating residential mortgage loans." A company that hires or is hired by an attorney does not itself avoid the requirement for licensing if providing loan modification services.
A licensee performing a loan modification may charge fees upfront for services to be provided. Licensees that charge a fee for loan modification services in advance of the services being provided must obtain a signed fee agreement for loan modification services from the borrower. Fees paid in advance of services provided must go into the company's trust account prior to disbursement, or be submitted to an independent escrow or title company to be held until disbursed at the instruction of the parties consistent with the fee agreement. Licensees are prohibited from collecting fees via direct access to a borrower's bank account or via use of the borrower's credit card.
A loan modification normally begins with a hardship analysis, which is an examination of the borrower's current mortgage, income, expenses and ability to repay. The hardship analysis includes meetings or conversations with the borrowers and a determination of the borrower's eligibility for a modification based on the particular lender's eligibility requirements or the eligibility requirements of a federal modification program. The hardship analysis, sometimes referred to as "Phase I services," should take no more than five hours to complete. The usual or customary fee for a hardship analysis of an owner-occupied first-lien mortgage and second lien, if applicable, is $750 or less.
Phase II services include communications with the lender or servicing company, negotiating loan terms or conditions on behalf of the borrower, reviewing proposed loan modification documents, meetings or conversations with the borrower, and ensuring the borrower has copies of all executed documents. A usual or customary fee for completing "Phase II services" is $750 or less, anticipating that a significant portion of this amount is usually refunded to the borrower if a successful loan modification is not obtained. If the borrower's loan modification requires extraordinary effort and time, the fee agreement must be amended in writing to document the extra services justifying the higher fee. Fees exceeding the usual and customary fees described above may be considered unearned and in violation of the acts. Additionally, loan modification providers are encourage to charge the borrower less than the usual or customary fee if the work involved does not warrant a higher fee.
In order to qualify for a fee, the successful loan modification must result in a net tangible benefit to the borrower. For purposes of this interpretation only, a net tangible benefit includes: bringing the borrower out of default into a current status if the existing mortgage meets the borrower's ability to repay, reducing the principal and interest payment by a minimum of ten percent, changing the loan type from adjustable to fixed; lowering the interest rate to be consistent with prevailing market rates but by no less than a 100 basis point reduction; principal reduction that results in an 80% CLTV, based on current market evaluation; or other interest rate or principal reduction that results in a DTI ratio of no more than 31%.
Any person providing loan modification services must provide the borrower a fee agreement that includes specific fee and activity information. Persons providing loan modification services must also conspicuously disclose to the borrowers that free HUD approved housing counseling is available and that the borrower may obtain a loan modification by contacting the lender or servicer directly. The disclosure must include HUD's counseling telephone number and website link to the Washington counselors.
All individuals who offer or negotiate loan terms for borrowers are prohibited from soliciting or entering into a contract with a borrower that provides in substance that the mortgage broker or loan originator may earn a fee or commission through "best efforts" to obtain a loan modification even though no loan modification is actually obtained for the borrower.
Noncompliance may result in the imposition of any of sanctions including, but not limited to injunctions, fines, restitution to the borrower, refusal to renew a license, refusal to grant a license, or license revocation.
MORAL
I do not want to sound disagreeable, but I know it can take anywhere from 10-22 hours of actual time to perform a loan modification. I would find it interesting to know where Washington state got its numbers from since in this one lawyer's opinion they are dreaming if they think it con be done in less than ten hours.
WASHINGTON STATE ENFORCING "RED FLAG" MANUAL COMPLIANCE AS OF MAY 1, 2009 -- P.S. SO IS THE FTC
FACTS
Washington State Department of Financial Institutions states: The FTC has confirmed on April 10, 2009 that the "red flag" rules apply to mortgage brokers. They base their interpretation in part on the level of risk of identity theft that exists at the time a borrower directs a mortgage broker to originate a loan.
The FTC stressed that they expect to spend a period of time doing outreach and industry support on this topic. DFI expects licensees to comply within the FTC's compliance timelines. DFI's enforcement of compliance will track with the FTC's process.
MORAL
If you do not have it and allow a fraud loan to go through, you can arguably be held liable and definitely will be held liable pursuant to your broker-lender agreement. If you would like to purchase one from us go to our website
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
