FTC DELAYS IMPLEMENTATION OF THE RED FLAGS RULE UNTIL AUGUST
FACTS
The Federal Trade Commission will delay enforcement of the new "Red Flags Rule" until Aug. 1, 2009, to give creditors and financial institutions more time to develop and implement written identity theft prevention programs. For entities that have a low risk of identity theft, such as businesses that know their customers personally, the FTC will soon release a template to help them comply with the law. This announcement of April 30, 2009 does not affect other federal agencies' enforcement of the original Nov. 1, 2008 compliance deadline for institutions subject to their oversight.
The Fair and Accurate Credit Transactions Act of 2003 directed financial regulatory agencies, including the FTC, to promulgate rules requiring creditors and financial institutions with covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. FACTA's definition of "creditor" applies to any entity that regularly extends or renews credit or arranges for others to do so and includes all entities that regularly permit deferred payments for goods or services.
Some examples of creditors are: mortgage brokers; finance companies; automobile dealers that provide or arrange financing; utility companies; telecommunications companies; non-profit and government entities that defer payment for goods or services; and businesses that provide services and bill later, including many lawyers, doctors, and other professionals. Financial institutions include entities that offer accounts that enable consumers to write checks or make payments to third parties through other means, such as other negotiable instruments or telephone transfers.
There is an alert on the rule's requirements located at
MORAL
You can still purchase ours ready to use and update as necessary or invent your own. See our website
CORRECTION TO MORTGAGE E-ALERT 09-4-04A AND FEDERAL MORTGAGE E ALERT APRIL 20, 2009 REGARDING DISCOUNT POINTS
FACTS
In the article under discount points I had stated underwriting fees count not be charged for FHA loans. That was incorrect.
Pursuant to Mortgagee Letter 2006-04: "Mortgagees may charge and collect from mortgagors those customary and reasonable costs necessary to close the mortgage. Except for discount points, these fees may also be used to meet the homebuyer's minimum investment requirement. Due to existing requirements, mortgagors may not pay a tax service fee, and may not be charged an origination fee greater than one percent on forward mortgages (plus the supplemental origination fee on Section 203(k) rehabilitation mortgages), nor more than two percent on FHA's Home Equity Conversion Mortgages. Mortgagees are also reminded that aggregate charges may not violate FHA's tiered pricing rules."
MORAL
Thank you all for bringing the error to my attention.
WELLS REQUIRES HVCC FORM SIGNED BY BORROWER
FACTS
Wells Fargo requires a written acknowledgement, signed by the borrower, that they either received all appraisal reports at least three business days prior to close, or they have waived their right to receive such reports within the time frame set out in the Home Valuation Code of Conduct. This policy remains in effect for loan applications taken on and after May 1, 2009.
MORAL
If Wells Fargo wants it so will others. You may want to make sure you have it in your checklist for all lenders.
IS FANNIE MAE SETTING THE SCENARIO SO THAT SENIORS CAN BE CHEATED?
FACTS
For years, reverse mortgages have been reliable so that seniors could live off the equity in their homes as they age. While complicated, these loans have been highly regulated in terms of fees and rate disclosures. Geared to homeowners age 62 and above, they provided peace of mind because rates and fees usually were set when the loan process started.
Now, reverse mortgage veterans are concerned that some sudden changes by Fannie Mae such as allowing margins to fluctuate almost daily until the funding process is complete will confuse seniors and cause them to question whether they are getting fair treatment.
Fannie Mae is trying to attract more money to the reverse mortgage market by increasing the amount lenders can make on selling the loans. By raising fees and allowing rates to change the amount of money the senior will receive will be lower. It also increases the probability of fraud risk as competition for their business increases and bait and switch can easily come into play
The National Reverse Mortgage Lenders Association expects reverse mortgages to grow to about 150,000 in 2009 up 30% over last year.
In April and without any real warning, Fannie Mae made changes that allow for higher margins for reverse mortgage lenders. Under the new rules the margin -- typically 3.25 to 3.75 percentage points -- can change from the time a borrower submits an application and the loan is funded, which can be up to 120 days.
The borrower signs a disclosure form from the lender projecting the maximum amount of money the borrower may receive. But with rates that can change, the senior will not really know how much they can borrow until closing, or days before. That makes the disclosure form practically useless. The reality of the draconian move by Fannie Mae is to create uncertainty in the reverse mortgage market place.
Fannie Mae has been almost alone in buying up reverse mortgages. Now, more buyers will join Fannie Mae in the loan resale arena, lured by bigger profits from the higher margins. Amy Bonitatibus, a Fannie Mae spokeswoman, is alleged to have said the pricing adjustments are meant to bring more investors and more cash flow into the reverse mortgage industry. In reality the higher margins are more likely to turn the reverse mortgage industry into the more traditional loan market, creating heavy competition that could lead to over-lending and introduce more predatory lenders.
Seniors considering reverse mortgages as a foreclosure lifeboat will endure a longer process as they shop around for different rates. And, they face the uncertainty of finding out days before closing that the margin has changed and they will be receiving less than they expected.
Industry insiders fear that the margin increases will lead to higher instances of fraud, with lenders quoting a low margin to get clients interested, and then disclosing a margin increase later in the process in a "bait-and-switch" strategy. (ap5109)
MORAL
Away goes one fraud of stated income created through Wall Street and the banks and in comes another now created by a quasi-government entity. Let us create margins allowing some people to quote it low and then when ready to close quote it high when the borrower senior citizen cannot back out. Thank you Fannie Mae.
FOUR HIGHEST STATES IN THE NATION FOR FORECLOSURE IN THE FIRST QUARTER 2009
FACTS
Nevada had the nation's highest foreclosure rate among states during the first quarter, with one in every 27 households receiving a filing. Arizona had the second highest foreclosure rate. That was followed by California. Florida had the fourth highest foreclosure rate for the quarter, with one in every 73 households getting a notice. (nplsnws.com41609)
MORAL
If you are looking for a home, you now know where to find bargains.
PHOENIX HOME PRICES DOWN ALONG WITH LAS VEGAS AND
SAN FRANCISCO
FACTS
Phoenix home prices were down in February 2009 by 35.2% when compared with February 2008. Home prices in 20 major cities fell 18.6% from February 2008. Prices fell by more than 10 %in 15 cities, including Las Vegas, San Francisco and Phoenix.(ap42909azcent.com)
MORAL
First they go up and then they go down. Does anyone fell like they are on a roller coaster?
WHY IS A FORECLOSURE GENERALLY BETTER THAN A SHORT SALE?
FACTS
Lenders more and more appear to be inserting language into short sale contracts that allow them to sue for any deficiency or the amount lost by a bank by selling a home for less than the mortgage. This lets the bank/lender sue for collection by assigning the deficiency to collection agencies that can sue the seller that sold on the short sale and leave that person with a court judgment that can run into the hundreds of thousands of dollars.
From the point of view of the nation's premier credit scoring firm, short sales and foreclosures are equally damaging to credit scores. To avoid the problem you must read the short sale contract the seller is going to sign and if it has a deficiency clause that makes the seller liable for any money after the sale, it needs to be removed. If not the odds are the seller is better off letting the property go to foreclosure. There are exceptions.
Such clauses mean that a borrower's troubles might not end with the short sale -- the lender could sue the borrower for a deficiency at a later date or turn over the unpaid debt to collectors after the short sale closes.
In a foreclosure, the homeowner leaves but the lender will usually negotiate "cash for keys" so the house is left broom clean instead of in a shambles.
However, credit score mathematical models make no distinction whatsoever between a short sale and a foreclosure.
In some cases the lender can pursue a deficiency judgment in foreclosure, as well, depending on the type of loan. If it is a refinance and the second mortgage is extinguished due to the foreclosure there can be tax consequences and the lender could sue on the now unsecured note. There are two exceptions but only two that I am aware of. First is purchase money loan and second is the same lender holding the first and the second and this last is not a guarantee.
Whether the lender pursues a deficiency depends upon the borrower's ability to pay on a judgment.
On purchase money mortgages, a lender cannot legally sue the borrower for nonpayment. The lenders only means of recouping the loan is to foreclose on the house.
MORAL
Before the borrower signs a short sale agreement, read the fine print and have the lenders delete language that would allow them to sue the borrower sometime after the sale. The borrower should definitely see his CPA before foreclosure to avoid potential debt forgiveness taxes.
SOME CALIFORNIA BILLS THAT CAN HURT YOU IF THEY PASS
FACTS
ASSEMBLY:
AB 260: Gives mortgage brokers fiduciary duty to clients, meaning possible consequences if borrowers are given loans they can't afford.
AB 603: Bans buyers of bank repos from booting existing renters for at least a year, unless renters aren't making payments.
AB 764: Prevents loan-modification firms from getting advance fees.
AB 919: Puts a special "rider" on mortgage deeds, listing lender, mortgage broker and appraiser to have a paper trail in case the loan later goes bad.
AB 957: Makes banks allow buyers of repos to use their own title and escrow companies.
AB 1160: Requires mortgage documents be translated into Spanish, Chinese, Tagalog, Vietnamese or Korean if the mortgage was negotiated in one of those languages.
AB 1534: Blocks home builders from steering buyers to their own "in-house" mortgage operations.
SENATE:
SB 94: Prevents loan-modification companies from charging fees up front.
SB 97: Prevents state from taxing forgiven mortgage debt as additional income.
SB 109: Makes real estate auction firms post more detailed information about bank-owned properties before auction, including existence of liens.
SB 120: Prevents people who buy bank repos from shutting off utilities or changing locks to get tenants to move.
SB 127: Provides more advance notice for foreclosure sales on county courthouse steps and more details about the properties to encourage more buyers.
SB 239: Creates new category of mortgage fraud in state law, giving authorities more power to prosecute.
MORAL
Pay attention to the ones that are highlighted. If they pass, the loan officer and mortgage broker might have problems.
CALIFORNIA WOMAN PLEADS GUILTY TO LOAN MODIFICATION SCAM
FACTS
On April 30, 2009 Attorney General Edmund G. Brown Jr. won a guilty plea from Anna Santos, who conned thousands of dollars from homeowners in a "cruel and sophisticated" loan scam.
Santos will be formally sentenced on May 20, 2009 in Los Angeles Superior Court. She is expected to receive two years in prison.
Attorney General Brown said, "Santos conned thousands of dollars from homeowners trying to save their homes through a cruel and sophisticated scam," Brown said. "She held out hope, but in reality did not provide an ounce of loan modification, leaving her victims unprotected and in far worse straits."
Santos was arrested on March 12, 2009 after she used forged documents to convince victims to hand over thousands of dollars for non-existent loan modification services.
Santos obtained a fictitious business permit through the City of Los Angeles for a company called "Payment Processing Department." She opened several bank accounts and two post office boxes under that name. She mailed flyers to vulnerable homeowners that appeared to be from victims' lenders or a government agency. The flyer used a large, bold header that read "Final Notice" and advised homeowners that they qualified for a special program to save their home from foreclosure.
After signing up for "loan modification services," homeowners then received what appeared to be "confirmation" that their lender had been notified. Many victims also received loan modification documents that appeared to be from their lender. These documents were all forgeries.
The victims were informed they had been placed in a "probationary" program and their mortgage payments should be submitted to "Payment Processing Department" and sent to a given post office box address. None of the payments were credited to the victims' home loans. Payments sent to the post office box were retrieved by Ms. Santos and deposited into the bank accounts she had opened.
Santos targeted seniors and homeowners on the verge of foreclosure. It is believed that she scammed more than 100 victims. On average, victims lost approximately $3,000, at a time when they could not afford their mortgage, let alone additional fraudulent expenses.
Since taking office, Attorney General Brown has shut down loan modification and foreclosure rescue scams and fought companies that have misled vulnerable borrowers: In March 2009, Brown shut down Foreclosure Freedom, a fraudulent loan modification company that continued to collect fees and mortgage payments from dozens of homeowners without ever providing any loan modification services. In November 2008, Brown arrested three members of First Gov after the company demanded an up-front fee, ranging from $1,500 to $5,000, to participate in a loan-modification program and never renegotiated the loans. In October 2008, Brown announced an $8.68 billion settlement with Countrywide Home Loans after the company deceived borrowers by misrepresenting loan terms, loan payment increases, and borrowers' ability to afford loans. In May 2008, Brown shut down a team of scam artists that acquired deeds to hundreds of homes in foreclosure by convincing desperate consumers to pay $10,000 to place their property in a land grant, a phony and worthless real estate document, and then tricked homeowners into signing over the deed to their home and paying the company rent. In March 2008, Brown shut down Lifetime Financial, Nations Mortgage, Greenleaf Lending, Virtual Escrow, Olympic Escrow and Direct Credit Solutions after the companies ran a complex predatory lending scheme using bait and switch tactics to victimize thousands of homeowners, many of who lost their homes. (la5109impvlynews)
MORAL
Many of you should recognize some of these names. If you have played with anything similar, I suggest you see your attorney or us now rather than after you are sued or indicted as the case may be.
NEW UNIFORM POWER OF ATTORNEY FOR COLORADO
FACTS
Colorado has repealed the laws regulating powers of attorney and instead enacted the Uniform Power of Attorney Act. The Uniform Power of Attorney Act is effective immediately. The current laws regulating powers of attorney will remain in effect until Dec. 31, 2009. On and after Jan. 1, 2010, all powers of attorney will be governed by the Uniform Power of Attorney Act. (alrg42809)
MORAL
If someone is suing a power of attorney to sign off on a mortgage or grant deed, be certain you have the right form or you may not have the right security.
CONNECTICUT ATTORNEY GENERAL NAILS COUNTRYWIDE/BANK OF AMERICA FOR NOT PREVENTING EMPLOYEE STEALING OF CUSTOMER IDENTITIES
FACTS
On January 29, 2009 Attorney General Richard Blumenthal and Department of Consumer Protection Commissioner Jerry Farrell Jr. announced that the new owners of Countrywide Financial Corp. would pay the state $350,000 and reimburse for credit freezes nearly 30,000 Connecticut residents affected by a massive data breach.
Upon submitting to Blumenthal's office written proof of payment for a freeze, consumers will be reimbursed by Bank of America, which bought Countrywide last year. Included in the reimbursement will be the cost of un-freezing credit. Bank of America will initially provide $25,000 for the fund, more if necessary, Blumenthal said.
A credit freeze -- a block by credit rating agencies on all credit under a consumer's name -- is one of the most effective ways to prevent identity theft.
A former Countrywide employee allegedly sold private financial data, including Social Security numbers, of more than 2 million consumers nationwide for thousands of dollars. The data breach came to light last August 2008 and has resulted in at least two arrests. A federal investigation is ongoing.
"Countrywide's appalling failure to properly protect sensitive customer data allowed the sale of personal financial information -- including Social Security numbers -- to the highest bidder. This data breach, a crooked employee collaborating with identity thieves, was inexcusable and unforgivable, a nightmare scenario in real life.
The settlement also requires Countrywide to adopt best practices for data management and security and assure Connecticut residents receive all the benefits of any settlements of private class action lawsuits above and beyond this agreement.
In August 2008 Bank of America also agreed to provide affected consumers with $25,000 of identity theft insurance and credit monitoring for two years. (ctag12909)
MORAL
This is what happens when a company does not have a privacy manual as required by FTC since 2004.
FIVE INDICTED IN $70 MILLION MARYLAND MORTGAGE FRAUD
FACTS
On April 22, 2009 a federal grand jury has indicted four defendants, and an information has been filed against a fifth defendant, for their participation in a massive mortgage fraud scheme that allegedly promised to pay off homeowners' mortgages on their "Dream Homes."
The indictment alleges that the defendants convinced many victims to invest at least $50,000 by refinancing their existing homes or buying new homes at inflated prices, while claiming that Metro Dream Homes would repay the mortgages with revenue from profitable businesses. The indictment alleges that there was no revenue to pay the mortgage payments. Instead, the conspirators used some of the investors' money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves.
Note that federal, state and local partners are working on 18 mortgage fraud task forces and 47 mortgage fraud working groups across the country.
The indictment, alleges from 2005 to 2007 the defendants allegedly used corporate names such as "Metropolitan Grapevine LLC," "Metro Dream Homes," "POS Dream Homes," and "POS DH LLC" (collectively, MDH) to target homeowners and home purchasers to participate in a purported mortgage payment program called the "Dream Homes Program." To participate, an investor had to provide a minimum of $50,000 for each home enrolled in the program, in addition to an "administrative fee" of up to $5,000. In exchange, the program promised to make the homeowner's future monthly mortgage payments, and pay off the homeowner's mortgage within five to seven years. Thereafter, the homeowner and MDH would own an equal interest in the home.
The indictment alleges that Andrew Hamilton Williams, Jr., of Hollywood, Fla., was the founder and owner of MDH; Michael Anthony Hickson, of Commack, N.Y., was the chief financial officer; Isaac Jerome Smith, of Spotsylvania, Va., was the president; and Alvita Karen Gunn, of Hanover, Md., was the vice president of operations. The information alleges that Carole Nelson, of Washington, was the chief financial officer of POS Dream Homes.
The indictment further alleges that Dream Homes Program representatives explained to investors that the homeowners' initial payments would be used to fund investments in automated teller machines, flat-screen televisions that would show paid business advertisements, and "Touch-N-Buy" electronic kiosks that sold telephone calling cards and other items. The defendants marketed the program through live presentations at luxury hotels in Maryland, Washington, and Beverly Hills, among other locations.
The indictment alleges that the defendants failed to tell investors that: the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue; the defendants used the funds from later investors to pay the mortgages of earlier investors; and MDH had not filed any federal income tax returns throughout its existence. The defendants also allegedly failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including the defendants, to: pay salaries of up to $200,000 a year as well as their mortgages; employ a staff of 10 chauffeurs and maintain a fleet of luxury cars; and travel to and attend the 2007 National Basketball Association All-Star game and the 2007 National Football League Super Bowl, staying in luxury accommodations in both instances. Nor were investors told that investor funds were allegedly used to: pay off investors in a prior failed ATM investment venture that Williams had founded called Bankcard Group; make multiple donations of up to $50,000 each to charitable organizations to allegedly give MDH the appearance of being financially successful; and fund investments in third-party businesses that had not been disclosed to investors.
On Aug. 15, 2007, the Maryland Securities Commissioner issued a cease-and-desist order to Williams, MDH and other related companies directing them to immediately cease the offering and sale of unregistered securities in connection with their promotion of the Dream Homes Program. However, the defendants thereafter allegedly called additional meetings in which they made additional misrepresentations about the financial success of MDH's operations. On Sept. 4, 2007, the defendants filed a legal challenge in federal court in Maryland to the cease-and-desist order. The indictment alleges that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds.
As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $70 million. When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.
The four indicted defendants face a maximum sentence of 20 years in prison for the fraud conspiracy; 20 years in prison on each of the 15 counts of wire fraud; and 20 years in prison for conspiracy to commit money laundering. Hickson also faces a maximum sentence of five years in prison for making false statements. Smith also faces a maximum sentence of 30 years in prison for bank fraud arising out of his alleged misrepresentation of his income in order to obtain a bank loan to purchase a new Bentley automobile. Nelson was charged by information with money laundering, which carries a maximum penalty of ten years in prison. The indictment seeks forfeiture of the fraud proceeds, including $70 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 proceeding. (usattymd42709)
MORAL
You are innocent until proven guilty but you sure are going to spend a lot of money on attorney fees and expert witnesses to try to prove innocence. Did you notice the reference to 18 plus 47 mortgage fraud groups? That makes one for each state plus a few extras. I would suggest that those contemplating being created with "primary residence" as the purpose for buying the property or "assisting" in the down payment contrary to rules, thick again. If not, we will be happy to represent you.
OHIO MAN CHARGED WITH MORTGAGE FRAUD SCHEME
FACTS
On April 29, 2009 a federal grand jury in Dayton has indicted Gregory S. Chew of Waynesville on one count of money laundering and 24 counts of illegally structuring currency transactions in connection with a mortgage fraud scheme.
Chew, doing business under the names RB, Inc., and Raging Bull Enterprises, recruited "investors" to buy and sell real estate using inflated property appraisals and false promises. False and fraudulent financial information was submitted to lenders in order to obtain mortgages at the inflated property values and this money was put to personal use.
The indictment alleges that Chew deposited proceeds from fraudulent mortgage loans into his own bank accounts between March 25, 2005 and Dec. 4, 2007.
Count one of the indictment alleges that Chew laundered the proceeds from the unlawful criminal activity by purchasing items for his own personal use. Counts two through 25 allege that Chew structured $213,630.02 in 24 separate deposits into his bank accounts by breaking large deposits into smaller ones in an effort to evade IRS cash transaction reporting requirements.
The indictment seeks forfeiture of a $26,000 motorcycle Chew purchased with proceeds of the crime, and a money judgment in the amount of the structured deposits.
Mail fraud is punishable by up to 20 years imprisonment and each count of structuring carries a penalty of up to 10 years imprisonment. (usattysdohio42909)
MORAL
The federal people do not fool around. Note innocent until proven guilty but then think of the expense of proving innocence. Now look at the forfeiture request. They chase the money you made in whatever form to take it back. Where is the profit in that?
THE OPINIONS EXPESSED ARE THOSE OF THE AUTHOR ONLY. THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
