FTC ALLEGES THAT MORTGAGE LENDER CHARGED HISPANICS HIGHER PRICES FOR LOANS
FACTS
The Federal Trade Commission has charged a home mortgage lender and its owner with violating federal law by charging Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers -- price disparities that cannot be explained by the applicants' credit characteristics or underwriting risk. The defendants are Golden Empire Mortgage Inc. and its owner, Howard D. Kootstra. The complaint was filed in the U.S. District Court for the Central District of California. The FTC seeks to bar future violations and obtain redress for consumers.
According to the FTC complaint, the defendants violated the Equal Credit Opportunity Act in how they priced mortgage loans. They allegedly gave loan officers and branch managers wide discretion to charge overages through higher interest rates and higher up-front charges. The defendants allegedly paid loan officers a percentage of the overages as a commission and failed to monitor whether Hispanic consumers were paying higher overages than non-Hispanic white borrowers.
The complaint alleged that the company's policy and practice of allowing loan officers to charge discretionary overages resulted in Hispanics being charged higher prices because of their national origin - price disparities that are "substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants."
The ECOA and its implementing Regulation B bar creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age, or the fact that an applicant's income is derived from public assistance.
NOTE: FTC files a complaint when it has reason to believe that the law has been or is being violated, and it appears to it that a proceeding is in the public interest. A complaint is not a finding or ruling that a defendant has actually violated the law. (ftc51109)
MORAL
If they lose I would suggest that Golden Empire Mortgage and its owner might have to dig deep into their pockets. Did you notice how the government is now consistently suing the individual owners as opposed to just the corporate entity? Kind of makes them sit up and pay attention. So pay attention and do an internal audit to protect yourself.
FTC OBTAINS PRELIMINARY INJUNCTION AGAINST NUMEROUS CALIFORNIA DEFENDANTS INCLUDING ATTORNEYS DOING LOAN MODIFICATIONS
FACTS
PRELIMINARY INJUNCTION
Pending a trial, the following: (1) Federal Loan Modification Law Center LLP; (2) Anz & Associates PLC; (3) LegalTurn Inc., a.k.a. Legal Turn Inc.; (4) Federal Loan Modification LLC; (5) Nabile "Bill" Anz; (6) Boaz Minitzer; and (7) Jeffrey Broughton, and their agents, servants, employees and attorneys and all those in active concert and preparation with any of them, are restrained from:
A. Outside the ordinary course of business, transferring, selling, alienating, liquidating, encumbering, pledging, leasing, loaning, assigning, concealing, dissipating, converting, withdrawing, or otherwise disposing, of any assets of corporate defendants, wherever located, including assets held outside the United States, or incurring charges or cash advances on any credit or debit card issued in the name of the corporate defendants. The assets affected by this paragraph shall include both existing assets and assets acquired after the effective date of this preliminary injunction wherever located. Provided that defendants shall produce, within 10 business days of the close of any calendar month, an accounting of all transfers made in that month in the ordinary course of business, and upon request of the FTC, provide within a reasonable period of time, copies of documents showing such expenses (e.g., books and records of accounts, financial and accounting records, balance sheets, income statements and bank records (including monthly statements, cancelled checks, records of wire transfers and check registers)).
B. Representing, guaranteeing, or estimating, or from assisting others who are representing, guaranteeing, or estimating, the likelihood, expressly or by implication, that any of the defendants or any other person will:
1. Obtain a modification of any term of a consumer's home loan, deed of trust, or mortgage, including any recapitalization or reinstatement agreement;
2. Obtain a pre-foreclosure sale, short sale, or deed-in-lieu of foreclosure;
3. Stop, prevent, or postpone any home mortgage foreclosure sale;
4. Save any consumer's residence from foreclosure;
5. Obtain or arrange lower or affordable monthly mortgage payments for any consumer;
6. obtain or arrange lower interest rates on any home loan, deed of trust, or mortgage for any consumer; or
7. negotiate the terms that any beneficiary, mortgagor, or other home loan holder will or is likely to offer or accept to cure any delinquency or default on, or to reinstate, any mortgage, deed of trust, or other home loan.
C. Guaranteeing or estimating, or from assisting others who are guaranteeing or estimating, the terms that:
1. Any beneficiary, mortgagor, or other home-loan holder will, or is likely to, order or accept or cure any delinquency or default on, or to reinstate, any mortgage, deed of trust, or other home loan; or 2. The amount of time it is likely to take for any of the defendants or any other person to, obtain or arrange a modification of a consumer's home loan, deed of trust, or mortgage, including any recapitalization or reinstatement agreement, provided however that Federal Loan Modification Law Center LLP and its agents and representatives shall be allowed to provide substantiated estimates of the time it will take it to internally process client documentation and submit loan modification proposals to lenders and disclose that they are unable to provide estimates concerning any final determination by the lender.
D. Representing that any of the defendants is affiliated with, endorsed or approved by, or otherwise connected to, the United States government, any governmental homeowner assistance plan, or any government agency, unit or department, including, but not limited to, the U.S. Department of Housing and Urban Development, the Federal Housing Administration, or the Department of the Treasury.
E. Marketing or advertising without disclaiming that any of the defendants, or any person affiliated with defendants, or defendants' agents, are not affiliated with, endorsed or approved by, or otherwise connected to, the United States government, any governmental homeowner assistance plan, or any government agency, unit or department, including, but not limited to, HUD, FHA or the Department of the Treasury.
F. Destroying, erasing, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any documents or records that relate to the business practices, or business or personal finances, of any of the defendants, or other entity directly or indirectly under the control of any of the defendants.
G. Failing to create and maintain books, records, and accounts which, in reasonable detail, accurately, fairly, and completely reflect the incomes, assets, disbursements, transactions and use of monies by any of the defendants or other entity directly or indirectly under the control of any of the defendants.
H. Selling, renting, leasing, transferring, or otherwise disclosing the name, address, telephone number, credit card number, bank account number, email address, or other identifying information of any person who paid money to any of the defendants for a mortgage loan modification or foreclosure relief service or who were contacted or are on a list to be contacted by any of the defendants; provided that any of the defendants may disclose such identifying information to a law enforcement agency or as required by any law, regulation, or court order.
I. Requesting or receiving payment of any fee or consideration in advance of performing each and every loan modification or foreclosure relief service that any of the defendants contracted to perform or represented would be performed for the party from whom payment is requested.
J. Refusing to refund any fees paid by a customer if a mortgage loan modification is not obtained or a foreclosure relief service is not performed.
It is further ordered that agents or representatives of the FTC may contact Federal Loan Modification Law Center LLP or its agents or representatives directly and anonymously for the purpose of monitoring compliance with this order, provided that any recordings made by the FTC of such communications that occur in the course of such contacts are provided to counsel of record for Federal Loan Modification Law Center LLP within a reasonable period of time. No security is required of the FTC for issuance of this Preliminary Injunction. FED. R. CIV. P. 65(c).
IT IS SO ORDERED, this 24th day of April, 2009.
CORMAC J. CARNEY
UNITED STATES DISTRICT JUDGE Case 8:09-cv-00401-CJC-MLG
MORAL
Did someone out there say that lawyers could not be chased and made to regurgitate funds? If the FTC obtains a judgment making them pay the money back, I would say a lot of these individuals are in trouble. Notice how the government is chasing the individual owners now?
FORMER REALTOR AND LOAN BROKER IN SACRAMENTO INDICTED FOR MORTGAGE FRAUD
FACTS
On May 7, 2009 The United States Attorney's Office announced a federal grand jury returned a nine-count indictment charging Dameene Dedrick and Roy Rice with four counts of bank fraud, and four counts of false loan statements as part of a mortgage fraud scheme. Dedrick also was charged with one count of mail fraud.
According to Acting United States Attorney Lawrence Brown, who is prosecuting the case, the indictment alleges that in February 2006, Dedrick purchased three homes in Elk Grove for a total of approximately $1.1 million. At the time, Dedrick was a licensed real estate agent. In two of the purchases, Roy Rice, then a loan broker, processed the loan applications. In all three transactions, Dedrick fraudulently inflated his earnings and represented that each home was to be his primary residence. He further created fictitious W-2 Wage and Tax Statements and earning statements for 2003-2005. Rice was aware of the false statements but nevertheless processed the applications, thereby receiving his commission. All three homes were later foreclosed on, resulting in losses in excess of $500,000.
The maximum statutory penalty for bank fraud and false loan statements is 30 years in prison, a fine of up to $1 million, and a five-year term of supervised release on completion of the prison sentence. The maximum penalty for mail fraud is 20 years in prison, a fine not to exceed $250,000, and a five-year term of supervised release. (usattyedcal5709)
MORAL
Notice the government went back to 2006. At a $500,000 loss they are looking at about two years in prison subject to other factors if proven guilty. Remember, they are innocent until proven guilty.
ILLINOIS "PLAIN ENGLISH NOTICE" TO BE GIVEN TO BORROWER
FACTS
TITLE 38: FINANCIAL INSTITUTIONS
CHAPTER II: DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION
PART 1050 RESIDENTIAL MORTGAGE LICENSE ACT OF 1987
SECTION 1050.1305 APPROVAL NOTICE
Section 1050.1305 Approval Notice
Immediately upon approval of a residential mortgage loan application, the licensee shall deliver to the applicant, also referred to in this Section as "borrower" or "customer", either personally or via first class United States mail or private delivery service, a written loan approval notice stating the terms and condition of the residential mortgage loan agreed to by the licensee and borrower. The approval notice shall state the following:
a) The exact expiration date of the loan commitment;
b) All economic terms of the loan and their duration; and
c) Whether the economic terms are fixed or, if subject to change, a plain English explanation of the time when, circumstances under, and extent to which they may be changed.
MORAL
There are so many rules and new laws coming down, that you really do need a compliance person or your attorney to keep track for you. Remember, it is a lot easier for the attorney to keep abreast and answer your questions then it is to defend the violation filed by the agency enforcing the rule, regulation or law.
SEVEN RESIDENTS OF INDIANA CHARGED WITH ABOUT $20 MILLION IN MORTGAGE FRAUD
FACTS
On April 30, 2009 Timothy M. Morrison, United States Attorney for the Southern District of Indiana, announced that seven persons were charged today in U.S. District Court in Indianapolis with crimes related to an alleged mortgage fraud scheme occurring between 2003 and 2005. They are: Tamara E. Scott, a.k.a. Tamara Penn; Donald T. Brown; Stephen Scott Brown; Aaron J. Warren; Mark Roth; Jerry J. Jaquess; and Timothy A Brown.
The first four individuals were each charged with one count of conspiracy to commit wire fraud and one count of money laundering. The last three individuals were each charged with one count of wire fraud and one count of money laundering. The investigation is not complete and is continuing.
According to the charges set forth in the seven separate informations, between November 2003 and August 2005, a total of 149 fraudulent loans amounting to $19.7 million dollars were obtained by the charged defendants from three different lenders, including 60 loans from the Argent Mortgage Company, 86 loans from People's Choice Mortgage/Countrywide Home Loans and three loans from The Money Station. The total estimated loss is $8,055,243. Each of the individuals charged are responsible for some, but not all, of the loans charged as set forth in their respective charging documents. Multiple defendants are charged in many of the loan transactions.
Participants in the schemes located properties and arranged to purchase them at a fair market value. Investors were located who were willing to invest their good credit, but no money, to be the purchasers of these properties at a much higher price than that negotiated with the seller. Most of these investors were unwitting participants in the scheme; the majority was located in Virginia and were friends and relatives of one of the participants in the scheme. They were told that they were joining an investment club, that they would not have to make any payments on the properties, and that the properties would be managed for them by various participants (including renting the properties and paying all bills). These investors received money for participating in the investment club, generally $4,000 for each property purchased in their name.
Mortgage brokers participating in the schemes allegedly prepared fraudulent loan applications, containing false statements, including: that the investors owned bank accounts, stock and other assets which they did not own; that the investors had income which they did not actually have; and that the investors were making the down payments on the properties from their own funds. In reality, other participants in the schemes actually provided the down payments for the properties, and were paid a fee of $1,000 to $3,000 for doing so. Appraisers were employed by scheme participants to prepare appraisals which vastly overstated the values of the properties, in order to support the sales price which was ultimately shown on the closing documents. The false loan applications, appraisals, and other fraudulent documents were then submitted to the lenders. The loans were funded via wire transfers of money from the lenders to a title company, which the scheme participants used to assist them in preparing false closing documents and issuing title company checks. At the time the loans closed, the properties sold for the fraudulently inflated sales price, and the fraudulently obtained loan proceeds were shared by scheme participants.
The sellers were paid the amount they had negotiated to receive. The scheme participant who had located the properties generally received $1,000 per property located. The loan processors were generally paid $500 for assisting in obtaining the loan. The scheme participant funding the down payment was paid $1,000 to $3,000 for each down payment they loaned. The scheme participant who recruited the investors and assisted them in signing the loans papers was paid $1,000 per loan. The remaining amounts were split between scheme participants and also used to pay existing mortgages on earlier purchased properties to keep the scheme from being detected by the lenders.
There were 52 loans related to the purchase of properties from individual sellers. These loans totaled $10,452,750 and were all issued by Argent.
The remaining 97 fraudulent loan transactions charged all relate to the sale of duplexes all owned by one person, thru various land trusts. Participants in the schemes negotiated with this individual to purchase all of the duplexes at a price of $50,000 each (the last group of these properties actually sold for $60,000). Investors were recruited to purchase each of these duplexes for $120,000 each. Inflated appraisals were obtained showing that the properties were worth $120,000 each. Immediately prior to the closing of the sale, the original owner transferred the properties via quitclaim deeds to scheme participants. Scheme participants were then shown as the sellers of the properties on the closing documents and investors who had been recruited were shown as the buyers. Fraudulent loan packages had been prepared and submitted to the lenders. Scheme participants funded the down payments. Lenders funded a loan in the amount of $96,000 on each of the 97 properties (a total of $9,312,000 in loan proceeds). After the properties closed, the original owner was paid his negotiated price (less any appropriate closing costs) and scheme participants received the remaining proceeds (generally in excess of $70,000 for each property). Eight of the loans were funded by Argent and three of the loans were funded by The MoneyStation. The remaining 86 loans were all originally funded by People's Choice Mortgage, a warehouse lender in Kentucky who had a correspondent lending agreement with Countrywide Home Loans in California. Countrywide Home Loans purchased all of these loans shortly after they were funded. All of the Windsor Village properties went into early payment default, that is, no payments were made on the mortgages and the lenders suffered a loss for the entire amount of the loans.
All of the loans involved went into default, and the lenders either foreclosed on the homes or took other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties. Many of the duplexes later re-sold in 2007 and 2008, generally for amounts between $3,500 and $15,000. In addition to the fraud or conspiracy charges, each defendant is charged with money laundering for allegedly conducting financial transactions in excess of $10,000 with the proceeds of the illegally obtained loans.
According to Assistant U. S. Attorney Susan Heckard Dowd, who is prosecuting the cases for the government, Scott, Donald Brown, Stephen Scott Brown and Aaron J. Warren each face a maximum possible prison sentence of 15 years and a maximum possible fine of $1 million. Roth, Jacquess and Timothy Brown each face a maximum possible prison sentence of 30 years and a maximum possible fine of $1 million. (usattysdin43009.)
MORAL
Notice the loans were six years ago. In many cases the government can go back 10 years on fraud loans. There is a paper trail everyone leaves that is very easy for the government to follow. Defense is very expensive. Remember two things: 1-they are all innocent until proven guilty. 2-Based on content and the fact the investigation is still ongoing, it seems appraisers and more brokers may join the party.
WISCONSIN U.S. ATTORNEY INDICTS FIVE FOR $14 MILLION MORTGAGE FRAUD
FACTS
A federal grand jury in the Eastern District of Wisconsin on May 6, 2009 charged five people with wire fraud and money laundering in connection with a mortgage fraud scheme. Charged were Paul J. Zaleski; Michael Pembroke; John F. Hochrek, Jr.; Patricia Lynn Kay; and Robert Farrell.
The indictment alleges Zaleski is the leader and organizer of the scheme. He is charged with 17 counts of wire fraud and five counts of money laundering. Pembroke and Kay are each charged with five counts of wire fraud and one count of money laundering. Hochrek is charged with seven counts of wire fraud, and Farrell, with six counts of wire fraud. If convicted, each defendant faces up to 20 years in prison for each wire fraud offense and up to 30 years in prison for each money laundering offense.
The indictment alleges that Zaleski orchestrated the purchase of at least 40 real estate properties by straw buyers who were led to believe that they were acting as members of an investment group. In order to secure mortgage loans, Zaleski and Farrell, working as loan originators at First Security Financial Services in Kenosha, Wis., prepared fraudulent loan applications in the names of the buyers. The applications contained, among other false representations, inflated appraisals, some of which were prepared by Hochrek. The purpose of the scheme was to funnel mortgage funds to Silver Creek Investments, Northpointe Development and Lakeside Property Management, all shell companies that were controlled by Zaleski, Pembroke and Kay.
The indictment also alleges that funds were subsequently laundered in transactions that involved the inducement of straw buyers and the purchase of additional properties. Over two years, numerous mortgage lenders advanced more than $14 million in fraudulently procured funds, at least $2 million of which was deposited into accounts for the shell companies. The loans subsequently went into default and foreclosure.
(usattyedwi5709)
MORAL
They are clamping down harder and harder and seeking forfeiture as well. Remember these people are innocent until proven guilty but it sure will be expensive to prove innocence.
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THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
