HUD/FHA REMINDER ABOUT NATIONWIDE LENDING FOR DIRECT ENDORSEMENT LENDERS (FULL EAGLE) AND LOAN CORRESPONDENTS (MINI-EAGLE)
FACTS
An FHA approved Title II mortgage or loan correspondent must request or have a separate FHA branch ID number to be used for the sole purpose of direct nationwide lending. Each mortgagee is limited to only one branch ID number for its direct nationwide lending operation, which shall have a separate manager and may be co-located in an existing office. The mortgagee shall only originate loans through the Internet and/or call center operations under this branch ID number.
Remember to update the quality control plan to include specific elements of the direct market lending. No employee shall have been denied a license or sanctioned by any state, Federal, State or local agency.
The URMLA shall not have the face-to-face interview box checked on any of these loans since it is done through the Internet or a call center. (ml05-40)
MORAL
Remember, HUD looks for the type of interview (face to face, telephone, etc) in the audits on the loan application and compares to the address and branch ID number used. Wrong interview, wrong ID and you risk losing your HUD approval.
MORE HUD/FHA QCP REMINDERS ABOUT WHAT TO LOOK FOR WHEN SELF-AUDITING
FACTS
When doing self audits on your files and company for FHA/HUD compliance, check for the following or you can be disciplined.
1. Verify none of your loan officers, underwriters, processors or anyone else in the loan process has another job in the same industry or you may find yourself paying down the principal and refunding the commission. HUD sends you a two-page questionnaire. It requests, among other things, a list of all employees with their respective dates of hire and a list of all employees who have left or been terminated in the previous 12 months. (4060.1 rev 2)
2. Verify the preliminary loan application, final loan application and credit reports are all consistent and if not reconciled satisfactorily. This is very important and in review one of the biggest area of errors and therefore HUD auditors look for it since it should have been found by the loan correspondent when it pulls credit and by the DRE underwriter when the loan is underwritten. (4060.1 REV 2, Ch. 7-7I)
3. Failure to have reports to management and management's response on 10% of the loans and 100% of the loans that go in default the first six months. (4050.1 Rev 2)
4. Loan applications are being taken from unauthorized branch offices not registered with HUD.
5. Persons signing the loan applications as interviewers are not the actual interviewers. I would remind you all this can be considered a felony if the violations are considered bad enough by HUD or HUD-OIG.
MORAL
These are not all the problems, just the prolific ones that show up at least seven times out of 10 HUD audits. This means with a 70% chance the violation will be there. The auditor is bound to look for it and you, the owner will receive the discipline that affects the bottom line. Therefore, audit the files or have us do it for you.
A CALIFORNIA LENDER CAN OBTAIN A DEFICIENCY JUDGMENT AGAINST THE BORROWERS IF IT IS INVESTMENT PROPERTY OR COMMERCIAL PROPERTY AND THE LENDER IS NOT THE OWNER OF THE PROPERTY.
FACTS
Normally if the purchaser is going to live in the property and it is seller financed even if it is up to five units the holder of the mortgage cannot obtain a deficiency judgment against the borrower either in a nonjudicial foreclosure through the power of sale in the deed of trust or a judicial foreclosure. Seller financing whether commercial or residential property is a purchase money loan and no deficiency judgment can be obtained.
A loan secured by the real property that is not financed by the seller (third party financing) such as investment property can leave the buyer subject to a deficiency judgment if there is a judicial foreclosure. (rutterrealprop6:563etseqcccp5801-580d)
MORAL
If you are obtaining investors for property to put in tenants do not tell him there is no risk because the lender can only look to the property for repayment. You can be wrong and then sued by the buyer, if the buyer gets sued by the third party lender. The lenders are in fact suing and we are defending several cases now where the first deed of trust has foreclosed and the holder of the second deed of trust is suing on the promissory note. Additionally, lenders are suing on the first deed of trust in judicial foreclosure to obtain a deficiency judgment where it is investment property and we are defending those as well.
CALIFORNIA DOES NOT NECESSARILY TAX DEBT FORGIVENESS INCOME ON OWNER OCCUPIED FORECLOSED PROPERTY
FACTS
California enacted SB 1055 which brings California personal income tax law into conformity with federal income tax law as far as debt forgiveness is concerned. Borrowers are not required to report up to $250,000 (or $125,000 for married individuals filing separately) of the amount of debt forgiven by a lender resulting from a short sale and refinances as income, so long as the loan is secured by the borrowers principal residence. This is only for discharged debts occurring between Jan. 1, 2007 and Jan. 1, 2009.
MORAL
See your CPA. There are other ways you do not have to pay taxes on debt forgiveness such as bankruptcy and insolvency.
CALIFORNIA ARBITRATION AGREEMENTS MAY BE UNENFORCEABLE IF THERE ARE TOO MANY UNCONSCIONABLE CLAUSES
FACTS
The courts will decide if an agreement is arbitrable if the claimant or employee meets the threshold of never agreeing to arbitrate. Provisions in an adhesive arbitration agreement that limit each party to one deposition and provide that the parties split the arbitration fees are unconscionable. Multiple unconscionable clauses in an arbitration agreement are not severable, causing the agreement to be unenforceable.
Here the arbitration agreement was in a stack of documents presented to the employee to sign at the time of hire. She stated she was unaware of it. The agreement provided the parties were to share the forum arbitration fees and each was limited to one deposition. The agreement contained a severability clause as well. (Ontiveros v. DHL Express (USA) Inc., 164 Cal.App. 4th 494).
MORAL
Demand mandatory mediation as the employer and then arbitration as voluntary. There are many good strategic reasons for doing this. Discuss them with your attorney.
COLORADO CHANGES MORTGAGE BROKER LICENSING LAWS
FACTS
Effective Aug. 5, 2010, the Colorado Mortgage Broker Licensing Act is changed to require licenses be renewed on an annual basis; continuing education and surety bond requirements are amended; and all residential mortgage loan application forms, solicitations and advertisements must display NMLS unique identifier of the mortgage loan originator. The name of the MBLA is also changed to the Mortgage Loan Originator Licensing Act. (alrg61509)
MORAL
Don't you just love all these changes? It will keep you busy and that is what you need, busy work! Right?
MICHIGAN CHARGES SEVEN IN MORTGAGE FRAUD BUST
FACTS
On June 11, 2009 Attorney General Mike Cox announced filed charges against seven individuals allegedly involved in a major mortgage fraud operation in Southeast Michigan. The charges resulted from a year-long investigation by the Michigan Mortgage Fraud Task Force and included efforts from the Michigan State Police, U.S. Secret Service, and the Attorney General's office.
Arraigned on June 11, 2009 was Eddie Zaben of Dearborn. Zaben is charged with one count of continuing criminal enterprise (racketeering), which could get him 20 years, and eight counts of false pretenses over $20,000, each carrying a 10-year term. The joint investigation revealed Zaben used his business, MYA's Investment Group LLC, to perpetrate large scale mortgage fraud. The scheme involved the financing of at least eight Wayne County homes in 2006 and 2007.
For each property, a straw buyer was recruited and asked to sign the closing papers. Zaben presented fraudulent mortgage applications on their behalf containing falsified employment and income information. Records indicate that some or all of the proceeds disbursed at the closing went to Zaben. As a result of the scheme, each of the properties has been foreclosed or is in the process of foreclosure.
Six others were charged earlier for crimes including ID theft, false pretenses, and uttering and publishing: Dagoberto Reyes of Detroit, Evelyn Santana of Union City N.J., Mohamed Beydoun of Detroit, Memoud Makky of Dearborn, Ali Hassan Haidous of Dearborn and Balil Hashem of Dearborn.
Zaben was arraigned on June 11, 2009 in the 19th District Court in Dearborn before Judge Hultgren. The court imposed a $20,000 personal recognizance bond and Zaben is next due in court for a preliminary examination scheduled for July 31. Other arrests could come shortly.
In the last six months alone, Cox has charged 12 people with mortgage fraud-related offenses. (miaga61109)
MORAL
Like I have been saying, the government agencies are getting tougher and tougher and clamping down harder and harder. Anyone that has been involved in mortgage fraud should consult an experienced attorney immediately. This way they may be able to mitigate the problem.
TWO LAS VEGAS MEN INDICTED IN FORECLOSURE RESCUE SCAM
FACTS
William Vargas and Michael Sinclair were indicted on one count of felony theft from a person 60 years or older and four felony counts of theft for allegedly operating a foreclosure rescue scam under the business name of Federal Housing Aid.
The indictment alleges that Vargas and Sinclair operated Federal Housing Aid since February 2007, offering loan modification services to assist people in avoiding foreclosure on their homes. The pair allegedly charged people between $899 and $1,500 in upfront fees and offered a 100% money-back guarantee, claiming their company would refund the money if foreclosure could not be stopped.
The company is alleged to have solicited people in Nevada from a call center in the Philippines, the indictment said. After paying for services, Vargas and Sinclair failed to provide services people had paid for, and failed to refund payments as promised in their advertisements. Michael Sinclair is believed to be in the Philippines.
Collecting fees before services are provided for loan modification is a violation of Nevada law, Nevada Revised Statute 645D.400. The state alleges that Vargas and Sinclair failed to perform foreclosure rescue services and failed to refund money as promised.
The case was filed by prosecutors assigned to the attorney general's mortgage fraud task force. (lvsun61209)
MORAL
I know a good lawyer there if they need one and they surely need one if not two.
NEVADA MORTGAGE LENDING DIVISION COMMISSIONER OFFERS SETTLEMENT TO A MORTGAGE LOAN AGENT
FACTS
SANDRA JONES OFFERED THE RIGHT TO SURRENDER LICENSE FOR ALLEGEDLY TAKING BORROWER LOAN FUNDS WITHOUT CONSENT.
As of June 12, 2000 Jones was registered with, and issued a mortgage agent license, which is currently inactive.
On Oct. 13, 1999, Tayllon Mortgage Corporation was registered with, and issued a mortgage broker license and acted as a licensed mortgage broker until the company closed on approximately March 5, 2008
Sandra Jones is alleged to be affiliated with, or employed by, Tayllon as a licensed mortgage agent from June 12, 2000, to Feb. 1, 2008.
On Jan. 17, 2008, MLD received a written complaint from an individual, MM, alleging, among other things, that:
a. In or around June 2007, Jones offered or provided mortgage agent services to complainant in connection with a mortgage loan which complainant subsequently concluded;
b. On June 26, 2007, complainant was to receive the cash out loan proceeds in the amount of $78,839.55.
c. Jones called complainant at work and requested a routing number to complainant's bank;
d. At the time, complainant did not have a bank account, so respondent told complainant that he could have his loan proceeds wired to respondent's business account and she would pay complainant $25,000 every week until paid in full;
e. Complainant agreed to deposit his loan proceeds into respondent's business account because respondent said it would take three weeks for complainant to open a bank account, deposit a loan proceeds check and wait for it to clear;
f. The next day, respondent paid complainant $25,000, in cash. At the same time complainant provided respondent a routing number to his account at Nevada Federal Credit Union and asked that she transfer the remainder of his funds;
g. Respondent failed to transfer the balance of complainant's loan proceeds to Nevada Federal Credit Union;
h. Respondent told complainant that she had spent complainant's money and would pay complainant back as soon as she could. Respondent also said that she would make complainant's mortgage loan payments until she paid complainant the balance of complainant's loan proceeds;
i. Subsequently, complainant received a phone call at work from Specialized Loan Servicing stating that complainant was three mortgage payments in arrears; and
j. Respondent failed to pay complainant the balance of complainant's cash-out loan proceeds.
Whereas, in response to the complaint, Jones stated, among other things, that:
a. Complainant did not have a bank account in order to deposit complainant's loan proceeds check in the amount of $78,839.55 and complainant only had one form of identification, so respondent agreed to deposit Complainant's loan proceeds "...in (her) business account."
b. In paying complainant back, Jones "...was unable to get the whole amount in cash so (respondent) paid (complainant) in increments at a time. (Respondent) tried to get (complainant's) money back to him as soon as possible and ran into some financial difficulty (herself). Respondent had to use $10,801.41 of the funds and agreed to pay (complainant) back as soon as (respondent) could..."
c. On Dec. 1, 2007, the remaining balance of the money owed by respondent to complainant was approximately $10,801.41;
d. On Dec. 1, 2007, respondent paid complainant $3,801.41 by cashier's check;
e. On Dec. 3, 2007, the amount of $966.67 was debited from respondent's account and applied to complainant's December mortgage payment; and
f. Respondent paid complainant the balance of $6,003.33, in cash.
At relevant times herein mentioned, Jones offered or provided mortgage agent services to complainant in connection with a mortgage loan transaction;
On or about June 26, 2007, Jones deposited complainant's loan proceeds check in the amount of $78,701.42 in her business account, Black & White Productions. Jones failed to pay the $78,701.42 back to complainant. Jones made payments to complainant in increments; and respondent had financial difficulty herself and used $10,801.41 of complainant's $78,701.42 loan proceeds.
Respondent shall, pursuant to NRS 645B.670 and/or NRS 622.400, pay an administrative fine in the sum of $5,000 to the Division. In addition, the respondent shall pay the sum of $553 to the Division for investigation costs directly related to the investigation of this case. All payments set forth in this paragraph shall be made within 30 days of this agreement being executed by the Commissioner of the Division.
Respondent shall further:
a. Immediately surrender her license and cease and desist from conducting activity requiring licensure pursuant to NRS Chapter 645B and the regulations promulgated thereto and agree to not seek licensing as a mortgage agent, mortgage broker or qualified employee pursuant to NRS Chapter 645B and the regulations promulgated thereto, a mortgage banker pursuant to NRS Chapter 645E and the regulations promulgated thereto or an escrow company and escrow agent pursuant to NRS Chapter 645A and the regulations promulgated thereto for a period of one year of this agreement being executed by the Commissioner of the Division. (mldweb61509)
MORAL
Based upon the above facts and presuming them true I would say Jones had an extremely good attorney and at the same time all things considered is extremely lucky.
TEXAS RESIDENT INDICTED FOR MORTGAGE FRAUD
FACTS
Pierre Sowell of Dallas was indicted by a federal grand jury in Plano for several counts of mail fraud and conspiracy to commit mail fraud in connection with a mortgage fraud scheme. According to the indictment, Sowell and an unindicted, unnamed co-conspirator are alleged to have engaged in a scheme to make false statements to mortgage lenders to obtain mortgage loans for Sowell to enable him to purchase three residences. The indictment alleges that Sowell and the unnamed co-conspirator caused several false statements to be made in each of the loan applications that were submitted to the mortgage lenders. Two of the homes were located in Collin County and the other in Dallas County. Sowell faces up to 20 years in federal prison if convicted. (usattyedtx61309)
MORAL
Notice the unindicted co-conspirator? Could it be because he was first to the U.S. prosecutor and first to tell and made a deal?
UPDATE ON HUD/FHA LENDERS, REQUIREMENTS AND ENFORCEMENT RELATED TO FHA INSURED LOANS
FACTS
1. There are currently 3,300 approved lenders with HUD/FHA.
2. FHA has about 30% of the single-family housing market as of today.
3. FHA lenders who fail to engage in loss mitigation activities prior to foreclosure are subject to both sanctions and civil money penalties.
4. FHA has the authority to deny approval to lenders that have unresolved findings from a field review by HUD or have been convicted of a felony related to participation in the real estate or mortgage industry.
5. S.A.F.E. Act registration is a condition of approval by FHA.
6. The Helping Homeowners Save Their Homes Act of 2009 prohibits anyone not approved by FHA from playing a role in the origination of an FHA loan. The act also provides clear enforcement authority to prohibit such third parties from playing a role in the origination of FHA-insured loans by allowing FHA to pursue civil money penalties against those that violate this provision.
7. Currently, lenders are required to notify FHA if the lender is denied or has lost a license to operate within a state. The new reporting provision requires that the lender must now also notify FHA if individual employees of the lender lose a state license. Additionally, this provision requires that the lender notify FHA if there is a revocation of a state-issued mortgage loan originator license issued pursuant to the S.A.F.E. Act.
8. FHA is extending the Credit Watch Termination Initiative to include not only the originator of the loan but also the lender that made the underwriting decision. (fhawrtnmemotohouseoversigt6-18-09)
MORAL
Did you note that if a third party is now involved in an FHA-insured loan that HUD can discipline that person? You are now required to notify FHA if an individual employee loses a state originator license. Lenders are now subject to credit watch determination where they underwrite a loan but did not originate it initially. Be careful. Check your credit watch status by looking at your "compare ratio." Be absolutely certain to keep track of your loan originators to make certain they have no licensing problems, no dual employment in the industry and no independent contractor loan originators unless of course you want to indemnify loans and pay down the loan principal by regurgitating the commissions.
THERS IS NO RESPA VIOLATION WHEN TITLE COMPANY CHARGES MORE FOR INSURANCE THAN ALLOWED BY STATE LAW AND SHARES DIFFERENCE WITH ITS LOCAL AGENTS
FACTS
Plaintiffs are homeowners in Maryland who purchased title insurance from Ticor Title Insurance Co. of Florida when they refinanced their mortgages. They alleged that Ticor charged them rates that were higher than the applicable rates Ticor had on file with the Maryland Insurance Commissioner. Plaintiffs claimed that Ticor, by splitting these excessive charges with its local agents, violated Section 8 of the Real Estate Settlement Procedures Act.
The United States District court held that because Ticor and its agents performed services in return for the charges that they collected, that plaintiffs' theory of liability conflicts with RESPA's statutory text and with the fact that RESPA is not a price control statute and dismissed the case. Plaintiffs appealed.
The 4th Circuit of the U. S. Court of Appeals said affirmed. Ticor has filed the rates it charges for title insurance with the Maryland Insurance Commissioner, and the commissioner approved those rates. The plaintiffs claim Ticor did not follow these filed rates when it sold title insurance policies to plaintiffs and others in Maryland. In particular, Ticor charged the wrong rate when plaintiffs purchased title insurance policies in connection with refinancing the mortgages on their homes and thereby charged them more than allowed and split the difference with the local agents. Plaintiff admits Ticor's agents performed closing and settlement services when plaintiffs refinanced their mortgages.
Section 8(b) of RESPA provides: "No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed." The text of the statute makes clear that it bars splitting a charge with a party that has not actually performed services. The statute does not prohibit charging what plaintiffs' claim is too much for services that have been performed, or splitting a fee with a party that has performed services. (Arthur, et al. vs. Ticor Title, No. 08-1727, 6-18-09)
MORAL
Remember this case. What does it mean to you? It means that neither HUD nor the California Department of Real Estate nor any other licensing agency should charge you with a RESPA violation if they think you charged too much for processing fees, origination fees or any other fee. However, that does not mean the agencies cannot charge you with violations of other code sections or regulations. So consult your attorney if the size of your charges can be questionable and definitely consult before not after you do it and get charges filed by your licensing agency.
CALIFORNIA HAS FOUR YEARS TO PROSECUTE YOU FOR VIOLATION OF THE HOME EQUITY SALES CONTRACT ACT
FACTS
Defendant Satish Shetty pled nolo contendere to a single misdemeanor count of home equity sales fraud in violation of Civil Code section 1695.8 which is part of the Home Equity Sales Contract Act. He appealed arguing his entitled to a reversal because the charged offense was barred by the three-year statute of limitations in Penal Code section 801.
The 2nd Appellate District of the California Court of Appeal said wrong. Shetty was originally charged with a felony complaint arrest warrant on May 21, 2007. The warrant sought the arrest of defendant and three co-defendants. This appeal only involves count 12--the charge to which defendant pled nolo contendere. Count 12 of the felony complaint alleges that on Aug. 19, 2003, defendant and his three codefendants violated Civil Code 1695.6, subdivision (a). It alleges defendants failed to provide Lawrence Herbert, a home equity seller, with a written contract that complied with the disclosure and other requirements in Civil Code sections 1695.2, 1695.3, and 1695.5.
Mr. Herbert, then aged 80, was told he could save his home from foreclosure by securing a second mortgage. Mr. Herbert was in arrears on his mortgage payments. On Aug. 19, 2003, Mr. Herbert was provided a series of documents to sign under the guise that he was securing a second mortgage on his property. The documents did not comply with the disclosure requirements imposed by the Home Equity Sales Contract Act. Only after the escrow closed was Mr. Herbert told that he had sold his home. Defendant was told that he had to sign a lease in order to stay in his home. Mr. Herbert asked, "Why do I have to sign a lease?" Defendant responded, "Because you don't own the property anymore." Mr. Herbert said, "I had no intention of selling my property." Defendant demanded, "You'll have to sign the lease or else we'll evict you." Mr. Herbert testified: "I had no intention of selling my house. I was told I was getting a loan." After defendant was held to answer, count 12 of the amended information contained the same felony charge as in the complaint which resulted in the issuance of the arrest warrant on May 21, 2007.
On Dec. 6, 2007, the prosecutor moved to amend count 12 of the amended information to allege a misdemeanor violation of Civil Code section 1695.6, subdivision (a). Defendant then pled nolo contendere to the misdemeanor charge. The prosecutor, on the express condition defendant's plea under count 12 remained viable, moved to dismiss counts 1-11 and 13-17. Defendant was then sentenced to serve 189 days in county jail and to pay a Penal Code section 1202.4, subdivision (b)(1) fine in the sum of $100.
Defendant asserts that all of the Civil Code section 1695.6, subdivision (a) counts were barred by the three-year Penal Code section 801 statute of limitations. The Home Equity Sales Contract Act regulates transactions between an equity purchaser and an equity seller resulting in the sale of residential real property in foreclosure. Count 12 alleges defendant violated Civil Code section 1695.6, subdivision (a) which states: "The contract as required by Sections 1695.2, 1695.3, and 1695.5, shall be provided and completed in conformity with those sections by the equity purchaser." Civil Code sections 1695.2, 1695.3, and 1695.5 impose disclosure and other requirements on home equity sale contracts. In order for the Home Equity Sales Contract Act to apply, the equity seller must reside in the residence. (Civ. Code, § 1695.1, subd. (b).
Civil Code section 1695.8 criminalizes violations of the Home Equity Sales Contract Act involving fraud or deceit: "Any equity purchaser who violates any subdivision of Section 1695.6 or who engages in any practice which would operate as a fraud or deceit upon an equity seller shall, upon conviction, be punished by a fine of not more than $25,000, by imprisonment in the county jail for not more than one year, or in the state prison, or by both that fine and imprisonment for each violation." Civil Code section 1695.8 is an alternative felony misdemeanor. (Pen. Code, § 17, subd. (b).
Because the offense is an alternative felony misdemeanor, the applicable statute of limitations is that for a felony violation. The present prosecution was commenced when the felony arrest warrant was issued on May 21, 2007.
The Attorney General argues the applicable statute of limitations is four years because the Civil Code section 1695.8 violation is an offense involving fraud. The Attorney General relies on Penal Code sections 801.5 and 803, subdivision (c). Penal Code section 801.5 states, "Notwithstanding Section 801 or any other provision of law, prosecution for any offense described in subdivision (c) of Section 803 shall be commenced within four years after discovery of the commission of the offense, or within four years after the completion of the offense, whichever is later." Penal Code section 803 subdivision (c) states in part, as it did in 2003 when the count 12 offense was committed: "A limitation of time prescribed in this chapter does not commence to run until the discovery of an offense described in this subdivision. This subdivision applies to an offense punishable by imprisonment in the state prison, a material element of which is fraud."
Civil Code section 1695.8 explicitly states that fraud or deceit is an element of the offense. In the context of this case, the preliminary hearing transcript indicates Mr. Herbert was defrauded into signing documents which resulted in his home being sold.
Penal Code section 803, subdivision (c) expressly applies in part "to an offense punishable by imprisonment in the state prison, a material element of which is fraud" which includes a violation of Civil Code section 1695.8. The enumerated offenses in Penal Code section 803, subdivision (c)(1) through (11) are illustrative and not the only crimes to which the four-year statute of limitations applies. (People v. Shetty, B205061, L.A. Sup. Ct. No. BA322871, 6-18-09)
MORAL
Do not get too greedy. This is one of the reasons you do not want to violate this act. If you are going to buy an owner-occupied home in foreclosure see your lawyer first; get the right contract and follow the instructions. Otherwise you could be charged with a felony to or a misdemeanor and in either case risk the loss of your license.
SAN BERNARDINO COUNTY, CALIFORNIA REAL ESTATE AGENT, WIFE, DAUGHTER AND AN ATTORNEY CHARGED WITH MORTGAGE FRAUD
FACTS
On June 4, 2009, investigators from the San Bernardino County Real Estate Fraud Prosecution Unit arrested a Rancho Cucamonga real estate agent, Richard Nazabal, in a fraud scheme that has defrauded scores of victims in the county. The following day, attorney Garabed Kamarian, was arrested at his Glendale office by DA investigators and Glendale Police.
Nazabal's stepdaughter Christina Martirossian surrendered herself to authorities. Nazabal's wife, Desiree Wilcox Nazabal, remains outstanding and is wanted on a $2.5 million arrest warrant.
Beginning in 2006 and continuing through 2008, it is alleged Richard and Desiree Nazabal solicited funds from victims to invest in several Inland Empire homes with the stated intention of renovating and reselling the properties at a profit. More than 25 people invested more than $2.5 million dollars with the Nazabals. Instead of investing the victims' funds, it is alleged the Nazabals used the money for personal gain and never purchased homes for the victims.
Christina Martirossian conspired with her mother and stepfather to allegedly falsely bill a cleaning company in order to continue to support the family's lavish lifestyle.
Attorney Garabed Kamarian allegedly applied for loans the Nazabals could not qualify for in order to purchase the luxury home in the extreme north end of Alta Loma in which the Nazabal family was living. Kamarian falsified the loan applications, showing he was the owner and primary occupant of the home in order to make the purchase of the residence on behalf of Richard and Desiree Nazabal.
Richard Nazabal and Garabed Kamarian were booked at the Sheriff's West Valley Detention Center in Rancho Cucamonga on arrest warrants charging multiple counts of grand theft with a bail amount for Nazabal of $2,500,000 and $500,000 for Kamarian.
Christina Marie Martirossian was booked and released on a $40,000 arrest warrant charging grand theft.
Investigators are seeking the public's assistance in finding Desiree Wilcox Nazabal. (Dist. Atty press release June 11, 2009)
MORAL
Stay away from mortgage fraud. Especially in San Bernardino County with $2.5 million bail.
THE FORECLOSURE PREVENTION ACT EFFECTIVE JUNE 15, DOES NOT APPLY IN PART TO THE FOLLOWING LENDERS/SERVICERS BUT IT UNDOUBTEDLY APPLIES TO YOU IF YOU PRIVATELY FUND OR FORECLOSE
FACTS
Bank of America Home Loans, CitiMortgage and Carrington Mortgage Services are among the first seven lenders and loan servicers granted immunity from the state's foreclosure prevention act in California.
The new law makes lenders prove to the state that they have a comprehensive loan modification program that helps borrowers stay in their homes. Those that can't prove it to the state's satisfaction must wait an extra 90 days before foreclosing on borrowers.
More institutions that received quick exemptions from 90-day delays: EMC Mortgage, Select Portfolio Servicing and Kondaur Capital Corp., the state Department of Corporations reported on its Web site. The law, which took effect June 15, 2009, prompted 41 applications from lenders and loan servicers aiming to prove their modification programs meet the state's test. Many more are expected.
State agencies reported on June 19, 2009 that 38 institutions received temporary 30-day immunity while the state reviews their applications. Among them were some of the Sacramento region's leading lenders, including Wells Fargo, GMAC and JPMorgan Chase. (CC Sections 2924, 2923,5 -2923.55)
MORAL
However, it does apply to you if you are a private lender or servicer under DRE, DOC through CFL or RMLA and intend to file an NOD or NOS and have not received the exemption. This is another lawsuit waiting to happen. If you have not applied, apply for the exemption now or face the very real rise of being sued when you attempt to foreclose.
CALIFORNIA REAL ESTATE BROKER ACCUSED OF DUPING PEOPLE OUT OF $20 MILLION
FACTS
Dozens of people are claiming they've been duped out of more than $20 million by a Thousand Oaks real estate broker who abandoned investors early this year with a brief letter saying he was broke. The FBI office in Portland and the Oregon Division of Finance and Corporate Securities are both investigating Louis "Jim" Borstelmann's business activities at Sunburst Associates Inc., which he operated for 30 years, the last few at 199 E. Thousand Oaks Blvd., suite 106. The office closed in January and the phones are disconnected.
Borstelmann supposedly got people to invest in second mortgages that he sold to homeowners. Investors were earning a 10% to 14% return, depending on whom you talk to.
There are dozens, if not more, people who've come forward saying they lost money to Borstelmann. Many are in Oregon.
One investor in Florence, Ore., Douglas Huntingdon, said he is living on food stamps, having lost $2.3 million to Sunburst Associates. But Huntingdon isn't getting much sympathy from some fellow victims who are suing him for his role in allegedly recruiting investors as Borstelmann's "agent." Huntingdon received 2% loan fees for his part. Douglas and his son, Don Huntingdon, say they are working with the FBI and have held gatherings at their home for investors to figure out what happened. So far, Don Huntingdon has a list of about 90 investors with claims totaling from $22 million to $23 million.
In a letter dated Jan. 23, 2009 from Sunburst Associates with no address on the letterhead and allegedly signed by Borstelmann investors were told:
"Dear investor, I regret I have to tell you that your investments with Sunburst have no value. The current crash of the housing market has wiped out any equity. I have no money or assets left and am $500,000 in debt. All I have left is my Social Security. Given the situation I am closing Sunburst and will likely file bankruptcy."
Miles Weiss, senior deputy district attorney who oversees the Real Estate Fraud Unit in Ventura County, has two complaints related to Borstelmann. Both were filed by Thousand Oaks residents, one claiming losses of $125,000 and the other $185,000. "What we are going to do is coordinate a potential investigation with federal authorities," he said, clarifying that his office likely will be working with the FBI.
To date, federal records reveal no bankruptcy filings for Sunburst or Borstelmann. (ventctystr62009)
MORAL
With $22 million unaccounted for I trust Mr. Borstelmann has a good attorney.
FIRST MAGNUS AND STONEWATER MORTGAGE SETTLE DIFFERENCES
FACTS
First Magnus Litigation Trust and StoneWater Mortgage have a settlement that will dismiss with prejudice claims against the mortgage company, its related companies, current officers, directors and employees. Both sides deny any fault. The lead counsel for the First Magnus Litigation Trust, Jamie R. Welton, said "the settlement reached with StoneWater is a good result for the creditors and increases the assets from which they may be paid."
One of those involved in the settlement is StoneWater president Doug Lemke. Former First Magnus and/or StoneWater executives Gurpreet S. Jaggi, Thomas W. Sullivan Sr., Thomas W. Sullivan Jr., Clinton W. Gaylord, Gary K. Malis, Dominick Marchetti and Karl F.W. Young are still active defendants in the lawsuit. The suit alleges the seven men stripped $300 million from First Magnus, prior to its filing for bankruptcy, to start StoneWater, which they deny. (bkruniv61909)
MORAL
I would say $300 million dollars is more than small change and each person remaining must have at least two lawyers and a CPA working on the case. The legal bill will in this person's opinion be horrendous. Meaning over $250,000 per person is my lowball guess.
IOWA SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING
FACTS
Effective July 1, 2009 the Iowa Secure and Fair Enforcement for Mortgage Licensing Act goes into effect. Mortgage loan originators and loan processors or underwriters acting as independent contractors are required to obtain a loan originator license under the ISFEMLA. Loan originators shall comply with education, renewals, notifications, advertisements, bonds and fee requirements. All application forms, solicitations and advertisements must contain the NMLS unique identifier of the loan originator.
Also effective July 1, 2009 the Money Bankers and Brokers Act requires compliance by mortgage bankers and brokers in submitting a "report of condition" to the NMLS on an annual basis.
Mortgage loan originators and loan processors or underwriters acting as independent contractors are not required to obtain a license under the ISFEMLA until Jan. 1, 2010. In addition, loan originator registration requirements under the MBBA are not repealed until Jan. 1, 2010. (alrgs52709)
MORAL
As you have seen and will continue to see everyone doing loans as a broker or independent contractor loan processor or independent contractor underwriter will have this nationwide unique identifier. It is sort of like being branded on the forehead nationwide. Your record (clean or otherwise) will travel with you wherever you may go.
NEW NEVADA LAWS AFFECTING MORTGAGE LOANS INCLUDING LICENSING, MODIFICATIONS AND FORECLOSURES
FACTS
MEDIATION BEFORE FORECLOSURE OF OWNER OCCUPIED HOMES. AB 149 Eff. 7-1-09
EXISTING LAW sets forth procedures governing foreclosures on real property upon default. A trustee under a deed of trust has the power to sell the property to which the deed of trust applies, subject to certain restrictions. (NRS 107.080, 107.085)
Section 1 of this bill establishes additional restrictions on the trustee's power of sale with respect to owner-occupied housing by providing a grantor of a deed of trust or the person who holds the title of record with the right to request mediation under which he may receive a loan modification. Once mediation is requested, no further action may be taken to exercise the power of sale until the completion of the mediation. Each mediation must be conducted by a senior justice, judge, hearing master or other designee pursuant to rules adopted by the Nevada Supreme Court, and a fee of not more than $85 per hour may be charged and collected for the mediation.
Section 2 of this bill also restricts the trustee's power of sale with respect to owner-occupied housing by revising the period in which a deficiency in performance or payment under the trust agreement may be made good before the trustee may exercise that power.
Section 3 of this bill restricts the trustee's power of sale with respect to owner-occupied housing by revising the manner in which service of notice that a person is in danger of losing his home must be made. Section 4 of this bill authorizes the Nevada Supreme Court to adopt rules providing for voluntary mediation with respect to a homeowner who is not in default but is at risk of default.
FORECLOSURE CONSULTANTS AND LOAN MODIFICATION CONSULTANTS LICENSED AND HAVE WRITTEN CONTRACTS WITH HOME OWNERS. AB 152 Effective 7-1-09
EXISTING LAW does not currently require a foreclosure consultant to be licensed. (NRS 645F.300-645F.450)
Section 3 of this bill requires the Commissioner of Mortgage Lending to adopt separate regulations for the licensing of a person who performs any of a variety of specified services for compensation, a foreclosure consultant and a loan modification consultant.
Section 3.1 of this bill requires such persons to execute a written contract with a homeowner before providing certain services for compensation. Section 3.1 also requires the Commissioner to adopt regulations describing the information that must be contained in such a written contract.
Sections 3.3 and 6.5 of this bill require a person who performs certain services for compensation, a foreclosure consultant and a loan modification consultant to deposit any money received as compensation for the performance of certain services in a trust account.
Section 3.3 also requires such persons to maintain certain records regarding such trust accounts and prohibits withdrawals from such trust accounts until the completion of certain services as agreed upon in a written contract for the performance of such services. Section 3.3 further authorizes the Commissioner or his authorized agents to inspect and audit the records associated with the trust accounts.
Section 3.5 of this bill grants certain additional powers to the Commissioner with regard to the conduct of any examination, periodic or special audit, investigation or hearing.
Section 3.7 of this bill requires the Commissioner to adopt regulations to establish rates to be paid by a person who performs certain services for compensation, a foreclosure consultant and a loan modification consultant for supervision and examinations by the Commissioner or the Division of Mortgage Lending of the Department of Business and Industry. (NRS 645F.280)
Section 3.9 of this bill requires the Commissioner to collect an assessment from such persons for deposit in the Fund for Mortgage Lending. (NRS 645F.290)
Section 5 of this bill revises the definition of "homeowner" as it applies to services performed by foreclosure consultants by expanding the definition to include any record owner of residence, rather than only the record owner of a residence in foreclosure at the time the notice of the pendency of an action for foreclosure is recorded or the notice of default and election to sell is recorded.
(NRS 645F.360)
Section 6 of this bill provides that an attorney at law is exempt from the provisions governing a person who performs any covered service for compensation, a loan modification consultant, a foreclosure consultant or a foreclosure purchaser unless the services rendered by the attorney are performed in the course and scope of his employment by or other affiliation with a mortgage broker or mortgage agent. (NRS 645F.380)
NO DEFICIENCY JUDGMENTS ON PURCHASE MONEY MORTGAGES ON OWNER OCCUPIED HOMES. AB 471 Eff. 10-1-09
Section 1 of this bill provides a right to cure a deficiency in payment on a mortgage or other encumbrance before a judicial foreclosure sale at any time not later than five days before the date of sale.
Under existing law, a judgment creditor or a beneficiary of a deed of trust may obtain, after a hearing, a deficiency judgment after a foreclosure sale or trustee's sale if it appears from the sheriff's return or the recital of consideration in the trustee's deed that there is a deficiency of the proceeds of the sale and a balance remaining due the judgment creditor or beneficiary of the deed of trust. (NRS 40.455)
Section 2 of this bill provides that if the judgment creditor or the beneficiary of the deed of trust is a financial institution, a court may not award a deficiency judgment to the judgment creditor or the beneficiary of the deed of trust if: (1) the real property is a single-family dwelling and the debtor or grantor was the owner of the property; (2) the debtor or grantor used the loan to purchase the property; (3) the debtor or grantor occupied the property continuously after obtaining the loan; and (4) the debtor or grantor did not refinance the loan.
Section 3 of this bill provides that the amendatory provisions of this bill apply only prospectively to obligations secured by a mortgage, deed of trust or other encumbrance upon real property on or after the effective date of this bill
MORTGAGE SERVICERS MUST NOW BE REGISTERED AND MORTGAGE BROKERS DO HAVE A FIDUCIARY RELATIONSHIP WITH THEIR CLIENTS. AB 486 Eff. 10-1-09
Sections 2, 13 and 19 of this bill authorize the Commissioner of Mortgage Lending to require escrow agencies, escrow agents, mortgage brokers, mortgage agents and mortgage bankers to pay restitution under certain circumstances.
Sections 3, 14 and 20 of this bill provide that if any person engages in the escrow business or the business of a mortgage broker, agent or banker without a license, the contract for the transaction in question may be voided by the other parties to the contract.
Sections 3, 17 and 20 of this bill authorize the Commissioner to impose an administrative fine of $50,000 under the same circumstances.
Sections 4, 5, 15, 16, 21 and 22 of this bill provide that parties to certain escrow and mortgage transactions may bring a civil suit against the person who has engaged in the escrow or mortgage business without a license and also establish provisions relating to the exercise of jurisdiction by a court of this State.
Section 6 of this bill increases the fine imposed on escrow agencies or agents from $500 to $10,000 for each occurrence of certain violations.
Sections 8 and 9 of this bill require a mortgage broker, as a condition to doing business in this state, to deposit with the Commissioner a corporate surety bond or other security in the amount of $50,000 for the principal office and $25,000 for each branch office, not to exceed an aggregate amount of $75,000.
Section 10 of this bill allows a surety to cancel a bond with notice and requires the Commissioner to inform a mortgage broker or mortgage agent that his license will be revoked unless an equivalent bond or security is deposited before the cancellation.
Section 11 of this bill provides for the manner in which claims against a bond may be paid.
Section 12 of this bill provides that a mortgage broker or mortgage agent has a fiduciary obligation to his client.
Section 24 of this bill grants regulatory authority over mortgage lending and related professionals, including foreclosure consultants, to the Commissioner by requiring the Commissioner to adopt regulations relating to mortgage lending and other professionals.
Section 25 of this bill requires certain persons and institutions in the business of servicing mortgage loans secured by a lien on real property located in this State to register with the Commissioner.
MORAL
Read these very carefully for two reasons: 1-If there is no surety out there that will bond a mortgage broker you are out of business; 2-Read the new summaries carefully because loan modifications are really controlled tightly.
OHIO MORTGAGE BROKER DRAWS THREE YEARS IN FEDERAL PRISON
FACTS
Andrew Pfeiffer of Lexington, Ohio pled guilty and was sentenced on June 19, 2009 to three years in prison on charges of bank and wire fraud, money laundering and filing a fraudulent federal income tax return. Judge James L. Graham in Columbus U. S. District Court ordered $760,129 in restitution to fraud victims, $40,430 more to the IRS and three years' supervision after release from prison.
The IRS said in May 2008 Pfeifer netted $153,815 from a federally insured financial institution in an illegal scheme; laundered $808,364; wired $1,480,263 between states; and omitted $145,972 in personal income on his 2005 federal tax return. Pfeifer had opened a mortgage brokerage company, Averdan Funding LLC, in 2004. The IRS
Pfeifer purchased rental properties and a residence with 100% financing and laundered $434,576 in proceeds from his mortgage fraud scheme by depositing the funds into various bank accounts.
Pfeifer was ordered to report to prison within 60 days. He had faced a maximum sentence of 30 years in prison and a $1 million fine based on the bank fraud allegations. (mansfieldnj62009)
MORAL
He must have really loved his wife!
PHILADELPHIA MAN SENTENCED TO OVER 12 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD AND IDENTITY THEFT
FACTS
Mahn Huu Doan, a/k/a "Bruce Doan" of Philadelphia, was sentenced on June 16, 2009 to 151 months in prison for a massive mortgage fraud and identity theft scheme. Doan, a self-described real estate investor, would purchase houses, using false or borrowed identities, using government insured loans which he secured using fraudulent information. Doan's scheme also involved fraudulent appraisals that inflated the value of the houses for the purpose of resell the properties for a higher profit.
In addition to the prison term, U.S. District Judge Michael M. Baylson also ordered Doan to pay more than $5 million in restitution, a $5,000 fine, a $400 special assessment, and to complete three years of supervised release. (usattyedpa61609)
MORAL
I told you they are getting tougher on the sentencing. The fallout due to foreclosures has made the mortgage broker and loan officer look like the bad guy similar to MADD. If you have or are involved in questionable mortgage loans you really do need to see competent counsel before the FBI or HUD-OIG sees you.
TEXAS WOMAN FOUND GUILTY OF FORECLOSURE RESCUE SCHEME
FACTS
On June 17, 2009 a federal jury returned a guilty verdict against Rosario Divins of San Antonio, who claimed to be a foreclosure prevention specialist, on seven counts each of criminal contempt and mail fraud.
The jury found that since January 2000, Divins engaged in a fraudulent foreclosure prevention scheme. Testimony during the three-day trial revealed that Divins unjustly enriched herself by collecting over $100,000 in cash from individuals in desperate financial situations who responded to her mail offering to stop their residential foreclosures. Divins continued to implement her scheme despite three separate sanctions from the United States Bankruptcy Court for the Western District of Texas ordering her to stop misrepresenting herself and making false promises to her clients.
Before the hearing adjourned, United States District Judge Fred Biery revoked Divins' personal recognizance bond and ordered that she be taken into custody until posting a $100,000 bond. Divins faces up to 20 years in federal prison for each mail fraud count. Judge Biery stated that the punishment for each criminal contempt charge will be at the court's discretion and that it will run concurrent to the sentence imposed on the mail fraud charges. Divins is also subject to a maximum $250,000 fine per count as well as full restitution to her victims. Sentencing is scheduled for Sept. 11, 2009. (usattywdtx61709)
MORAL
She went to trial. She lost. She is going to prison for a long time in this lawyer's opinion.
WASHINGTON STATE NEW LAWS
FACTS
| Beginning Jan. 1, 2010, the bond amounts required under the Mortgage Broker Practices Act and the Consumer Loan Act will be determined by loan origination volume. Bonding levels based on loan origination volumes will be determined through the rule writing process. All new CLA and MBPA applications received after Oct. 31, 2009 will require evidence of meeting these new bonding requirements |
Mortgage brokers who lend must have a CLA license.
| Effective 1/1/2010 | Beginning Jan. 1, 2010, non-delegated correspondent lenders licensed under the MBPA must hold a CLA license in order to make residential mortgage loans. To avoid potential business interruption and ensure timely licensure, DFI recommends that all MBPA licensees wishing to make residential mortgage loans apply for a CLA license no later than Oct. 31, 2009.MBPA licensees that transition to the CLA in 2009 will not have to pay assessments or file their CLA annual reports for 2009. MBPA licensees transitioning to the CLA can elect not to renew their MBPA license for 2010. Brokering and table funding remain permissible under the MBPA |
MORALIf there is no surety out there willing to bond you are out of business.
WEST VIRGINIA'S MORTGAGE LICENSING LAWS JOIN THE SAFE ACT
FACTS
West Virginia enacts the West Virginia SAFE Mortgage Licensing Act. Mortgage loan originators and loan processors or underwriters acting as independent contractors are required to obtain a loan originator license under the WVSMLA, unless exempt. Mortgage loan originators are required to comply with fees, bonds, education, renewals, notifications, advertisements, and disclosures. All application forms, solicitations and advertisements shall contain the NMLS unique identifier of the person originating the mortgage loan.
West Virginia Residential Mortgage Lender, Broker and Servicer Act is also amended. The required surety bond amount for licensees is now based on a tiered structure reflecting the total annual dollar amount of West Virginia loan originations. Licensing, fees, renewals, notifications, continuing education, and office requirements are amended.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
Please contact Herman Thordsen toll free (888) 667- 8529.
