TAYLOR, BEAN & WHITAKER OF FLORIDA SETTLE CHARGES THAT IT ALTERED INCOME AND ASSETS TO FUND NONTRADITIONAL LOANS
FACTS
Taylor, Bean & Whitaker Mortgage Corp., Ocala, Fla., will pay $9 million to settle a dispute with 13 states and the District of Columbia over how the wholesale lender handled certain nontraditional mortgages. TBW also agreed to modify loans for certain customers and to hire an independent firm to review nontraditional mortgages originated in 2006 and 2007. The settlement resolves claims that TBW altered applicants' incomes and assets to provide nontraditional mortgages. The mortgage lender did not admit wrongdoing as part of the settlement, which was reached with regulators in Arizona, Florida, Georgia, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, North Carolina, Pennsylvania and Vermont. (nmn62309)
MORAL
If you are doing a loan modification and this is the original lender and the loan was nontraditional you may want to discuss analyzing the loan for this violation and request that TBW put the borrower into a traditional mortgage. Be careful of how you word it and consult your attorney first because the wrong wording could get you into legal problems.
FORMER NFL AND UNIVERSITY OF GEORGIA FOOTBALL PLAYER CHARGED WITH MORTGAGE FRAUD
FACTS
Arthur James Marshall Jr., a former National Football League and University of Georgia football player has been charged with fraud and money laundering in connection with his real estate ventures. He has been charged with eight counts of defrauding three banks in obtaining loans for seven different properties. The indictment also charges Mr. Marshall with two counts of mail fraud for deceiving a mortgage lender and a homebuyer regarding the sale of two different properties. The indictment further charges Marshall with 11 counts of money laundering involving over a million dollars that he obtained from those fraudulent transactions. Mr. Marshall played in the NFL for five years as a wide receiver with the Denver Broncos and New York Giants and played at Georgia from 1988 to 1991. (nmn62309)
MORAL
Oh how the mighty have fallen.
41 PEOPLE CHARGED WITH MORTGAGE FRAUD IN ILLINOIS
FACTS
A total of 37 individuals and four businesses, including a title company that closed on allegedly fraudulent loans, are facing new federal charges relating to mortgage fraud in five separate cases in Chicago. In some of the schemes, the defendants were charged with falsely inflating the values of dilapidated homes. The defendants include a vice president of the title company, mortgage brokers, loan officers, real estate investors, appraisers and an attorney. Together the cases involve more than $48 million in fraudulently obtained mortgages issued by various lenders. The various lending companies are alleged to have suffered millions of dollars in losses after the loans went into default and the properties were foreclosed upon.
Among the cases are:
* Nineteen defendants, including LaSalle Title Co. and three other businesses, who allegedly schemed to fraudulently obtain loans totaling more than $10 million on 70 residential properties resulting in losses totaling approximately $5.8 million to various mortgage lenders;
* Ten defendants accused of scheming to fraudulently obtain loans totaling more than $17.2 million on various multi-million-dollar condominiums and penthouses.
* Six defendants accused of fraud and using stolen or fictitious identities to fraudulently obtain approximately $3 million in home loans from various lenders by submitting false applications for loans; and
* The chief executive of a Burr Ridge mortgage lender who allegedly defrauded GMAC Bank out of approximately $15 million in funding more than 450 fictitious residential loans.
All of the charges are felonies and carry various maximum penalties, including 30 years in prison and a $1 million fine on each count of mail and wire fraud if a financial institution was affected, or 20 years in prison and $250,000 fine if there was no financial institution impact. As an alternative, the court may impose a maximum fine totaling twice the gain to any defendant or twice the loss to any victim, whichever is greater. If convicted, the four business entities charged each face a maximum penalty of five years probation and a $500,000 fine. If convicted, the court would determine the appropriate sentence to be imposed under the advisory United States sentencing guidelines.
Indictments contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. But the expense of proving one innocent is horrendous in these types of cases.
Details of the cases announced today follow:
United States v. Lisnek, et al.
In one of the most comprehensive mortgage fraud schemes ever charged in Chicago, a Buffalo Grove couple, acting through two real estate investment companies they controlled, allegedly directed a scheme in which 15 individual defendants and four businesses purchased distressed properties, including from the U.S. Department of Housing and Urban Development, and then resold them for fraudulently inflated prices approximately two to three times the purchase price. Between 2002 and 2007, the defendants allegedly fraudulently obtained mortgage loans in excess of $10 million on approximately 70 residential properties. As part of the alleged scheme certain defendants paid other defendants to make homes "camera ready," by making them appear as though they had been rehabilitated.
Richard Lisnek, a licensed mortgage broker and president of K&L Real Estate Inc., and American Eagle Mortgage Inc., and his wife, Judy Kien, an attorney and president of D&J Properties II Inc., together with 13 other individuals and two other businesses, were charged with various counts of mail fraud and wire fraud in a 22-count indictment returned by a federal grand jury. Other defendants include another mortgage broker, three real estate appraisers, a title company and one of its vice presidents. Lisnek and Kien allegedly provided funds to buyers, which they falsely represented to lenders were the buyer's own funds for down payments. Various other defendants allegedly made false representations concerning the buyer's employment, financial condition, contribution towards the purchase price and intention to occupy the home, and the sales price, condition and value of the property. After fraudulently obtaining the loans, the victim lenders incurred losses totaling approximately $5.8 million because they were unpaid, causing the residences to be foreclosed upon and resold for amounts less than the outstanding mortgage loan balance. The indictment seeks forfeiture of the alleged loss amount.
According to the indictment, Lisnek solicited individuals with good credit to buy distressed properties from K&L Real Estate and D&J Properties by promising that they would not have to invest any of their own money and promising to repair the property and make the mortgage payments until the home was restored or provide funds to rehabilitate the property and assist in obtaining tenants under HUD's Section 8 subsidized housing program.
Lisnek recruited Alfredo Hilado and Mark Vargo to recruit other buyers, knowing the transactions would be financed by making false statement to mortgage lenders. Lisnek paid Vargo and others to make the distressed properties appear what Lisnek called "camera ready" or "picture ready" by making cosmetic repairs to front and rear exteriors so the homes would look fully restored or better than their actual condition.
Three licensed real estate appraisers, James Heiland, Brandon Bradford and Vlad Ostromogilsky, allegedly prepared inflated appraisals, falsely representing that those properties were fully rehabilitated, knowing that they would be used to support fraudulent loan applications.
Lisnek and licensed mortgage broker Alex Bulmash, president of Investment Group Inc., which operated as Investment Mortgage Group in Lincolnwood and Skokie, allegedly caused employees of IMG including Bulmash's brothers, Michael and Allen along with Anthony Navickas, to prepare and submit false loan applications and supporting documents, such as verifications of deposit and rent and property leases, on behalf of buyers of distressed properties from K&L and D&J.
Lynn Liskiewicz, a vice president and regional manager of LaSalle Title Co., allegedly caused Lasalle Title to close sales by K&L, D&J and Lisnek by creating false closing documents concealing that the down payments represented as the buyer's funds were actually provided by the sellers, that the purchase price was inflated, and that lenders were being deceived into financing all or a greater portion of the sale than portrayed for buyers with little or no equity in the property being purchased. The fraudulent closings included Kien signing settlement statements, known as HUD-1s, on behalf of sellers falsely representing the source of the buyer's funds.
Hilado, Vargo, and additional defendants Joanne Ruiz, Kenneth Turner and Antoinette Law, purchased property from K&L and D&J knowing that they and others signed false loan applications to fraudulently obtain mortgages.
The indictment seeks forfeiture of $5.8 million from the defendants. All 19 defendants were to be ordered to appear for arraignment in U.S. District Court.
United States v. Askar, et al., (08 CR 0036)
Ten defendants were charged with one or more counts of wire fraud in a 23-count indictment and unsealed after several defendants were arrested in connection with an alleged mortgage fraud scheme involving seven condominiums and two penthouses.
Mhde Askar and Mahmoud Saleh operated M&M Millennium Management Co. and participated in an incentive program offered by Millennium Centre's developer. Through the program M&M received from the developer at the time of purchase a rebate equal to up to three years of mortgage payments, without being required to return any of the rebated money if M&M sold the unit within the three-year period. Between July 2004 and December 2006, Askar, Saleh and their co-defendants allegedly fraudulently obtained more than $17.2 million in loans to purchase nine units. Askar and Saleh purchased the units in Askar's name or the name of nominee buyers to obtain a rapid and high financial return through the rebated mortgage payments, and then resold the units at increased prices to nominee buyers through fraudulently obtained mortgages, retaining both the rebated mortgage payments and the resale profits.
Askar and Saleh, along with Advar Shaltapour, also known as "Eddie Shaltapour," Manuel Aguilar, Catherine Kirk, Warren McKeithen, Nancy S. Praseuth, Margarita Garcia and David Ibarra, either recruited others or served as nominee buyers by promising or being promised that they would not have to provide any of their own money, they would received cash back at closing, others would make mortgage payments on their behalf, and the property would be in their name for only approximately a year before it was sold.
Askar, Saleh, Aguilar, Kirk and McKeithen submitted and caused others to submit false mortgage loan applications concerning nominee buyer's employment, income, assets and intention to occupy the residence being purchased, including to Ahmad Karkukly, who was a loan officer at Countrywide Home Loans Inc. Karkukly allegedly used his position to obtain approval of fraudulent loan applications on behalf of Askar, Praseuth, and Garcia, among others
Askar, Shaltapour and Karkukly were released on bond after being arrested on these charges. Saleh remains in federal custody pending a detention hearing. Arrest warrants are outstanding for Aguilar and Ibarra, while Kirk, McKeithen, Praseuth and Garcia will be ordered to appear for arraignment in U.S. District Court. The indictment seeks the forfeiture of $17.2 million from the defendants.
United States v. Okulaja, et al., (08 CR 0179)
Six defendants were charged with one or more counts of wire fraud in a three-count indictment and unsealed later after several defendants were arrested in connection with an alleged mortgage fraud scheme involving the purchase of two multi-million-dollar single-family residences. Between February and September 2007, the defendants allegedly fraudulently obtained loan proceeds totaling $3,393,435 from Countrywide Home Loans and Washington Mutual Bank FA.
Regarding one residence, the indictment alleges that in February 2007, Lilya Domnenko agreed to purchase 919 Arbor Lane, which her husband, Viktor Domnenko had built through his construction company, Creative Builders. Lilya Domnenko submitted loan applications to WAMU for $990,000 and $241,000, falsely stating that she was an employee of Creative Builders and earned $37,500 a month. Viktor Domnenko allegedly received approximately $80,000 of the fraudulently obtained loan proceeds after the sale.
In June 2007, Olanrewaju J. Okulaja asked Festus Segbawu to recruit a nominee buyer to purchase 919 Arbor Lane from Lilya Domnenko. Segbawu and Al Holman recruited an individual to use a stolen identity and introduced this individual to Okulaja, who allegedly paid another individual to obtain false employment information to support the bogus nominee purchaser's loan application.
Okulaja and Mhde Askar allegedly helped prepare and submitted to Countrywide a fraudulent loan application for $1.15 million, falsely stating that the nominee purchaser was employed, had substantial monthly income, savings and funds for the down payment, which, in fact, were provided by Askar, according to the indictment.
At the closing on June 25, 2007, Lilya Domnenko endorsed a check for her sale proceeds of $129,490 and gave the funds to Okulaja and Askar, knowing that they had no disclosed connection to sale of 919 Arbor Lane, the indictment alleges. Approximately two months later, Viktor Domnenko gave Okulaja and Holman checks for $10,000 and $30,000, respectively, as additional payment for recruiting the nominee buyer of the residence.
Regarding the second residence, in 2007 Okulaja and others allegedly recruited a nominee buyer to purchase a residence at 1619 Sunset Ridge. Again, Okulaja and Askar allegedly helped prepare and submitted to WAMU a fraudulent loan application for $2.3 million, falsely stating that the nominee purchaser was employed, had substantial monthly income, savings and funds for the down payment, which, in fact, Okulaja and Askar knew were provided by another individual who expected to receive an eight percent profit on the short term use of the funds.
At the closing on Sept. 21, 2007, Okulaja and Askar caused the title company to issue two checks -- one for $674,830 payable to a company that Okulaja had created to make his receipt of loan proceeds appear legitimate and which he shared with Askar and another individual, the indictment alleges, and a check for $730,000 payable to a company controlled by the individual who had provided the funds that were used by the nominee buyer.
Lilya and Viktor Domnenko, and Askar are free on bond following their arrests in this case. Okulaja remains detained in federal custody, while an arrest warrant is outstanding for Segbawu. Holman is scheduled to be arraigned along with Okulaja and Askar on June 26 in U.S. District Court. The indictment seeks forfeiture of $3,393,435 from the defendants.
United States v. Luckett
Lawrence A. Luckett, formerly chief executive officer and 25 percent owner of the former Home Mortgage Inc., in Burr Ridge, was charged with bank fraud in a criminal information filed today. According to the charges, Home Mortgage funded loans it made by borrowing money from other lenders. After issuing a mortgage, Home Mortgage sold the loan to a third party, typically a financial institution that invested in mortgages, and used the proceeds from the sale of the loan to repay its lender. Between August 2007 and March 2008, Luckett and an employee he directed allegedly submitted requests to GMAC Bank and an affiliated lender for more than 450 fictitious residential mortgage loans, causing GMAC a loss in excess of $15 million.
As part of the scheme, Luckett and his employee allegedly fabricated and submitted to GMAC documents relating to borrowers, biographical and property information for non-existent loans purportedly to be made by Home Mortgage. Instead of using the money advanced by GMAC to fund loans, Luckett allegedly used the money to continue operations of Home Mortgage and to pay various personal expenses. The charges also seek forfeiture of $15 million. If convicted, bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine.
United States v. Beck, et al.
Six defendants were charged with one or more counts of wire fraud in a nine-count indictment for allegedly engaging in a $3 million mortgage fraud scheme in the Chicago area. The indictment alleges that between February and December 2006, Alshawntus Beck operated three companies -- Compass Investments and Development Corp., 3834 West Maypole Inc., and West Horizon Construction -- which purported to be in the business of buying, repairing and reselling real estate.
Assisted by Michelle Parker, a loan officer at an area mortgage broker, Beck allegedly brought three nominee buyers to the brokerage to apply for loans to purchase from him three condominium units. Steven Corbett allegedly fraudulently applied for loans using the fictitious identity "Al Spann;" while Kevin Keller and Jimmie D. Johnson allegedly fraudulently applied for loans using stolen identities. Beck also allegedly recruited Otis Robinson III to create false real estate appraisals inflating the value of properties that Beck bought for himself and through nominees.
According to the indictment, Parker obtained false verifications of rent for Corbett and Buyer A. Similarly, Beck obtained forged documents falsely stating that Corbett was an employee of West Horizon Construction, and that Buyer A was an employee of Compass Investment and Development Corp., and Parker submitted the false documents to a lender to fraudulently obtain the loans. Parker also submitted to a lender a forged document provided by Beck that falsely stated that Keller had approximately $8,000 in a bank account that did not exist.
As part of the scheme, Parker also processed false loan applications for Keller, using a stolen identity, to purchase two properties. The loan application for one property was supported by a forged document that Beck provided, which falsely stated that Keller was an employee of West Horizon Construction, the indictment alleges. The loan application for the other property was supported by a falsely inflated appraisal, allegedly created by Robinson using the name of a real estate appraiser whose identity Robinson had stolen.
The indictment also alleges that Beck purchased two properties in his own name. The application for one loan was supported by a false verification of rent provided by Parker, and both loan applications were supported by falsely inflated appraisals provided by Robinson. Four months after buying one property Beck sold the property to Buyer B for a price that was 56% higher than Beck had paid by using another falsely inflated appraisal provided by Robinson, the charges allege. The indictment seeks forfeiture of $3 million from the defendants. (usattyndill62309)
MORAL
41 defendants! I would call that a lawyers right to work out and a defendant's nightmare. Did you notice the fact the U. S. Attorney is seeking forfeiture? Forfeiture is different than restitution. Forfeiture, if granted by the court, means the government can take any property in which you have an interest to satisfy the judgment where it can be shown the items were purchased with ill-gotten gains. (18usc981)
INDIANA PROHIBITS PREPAYMENT PENALTIES ON ARM MORTGAGES
FACTS
Effective July 1, 2009 Indiana prohibits prepayment penalties on first lien adjustable rate mortgages. Lenders are prohibited from contracting for or charging a prepayment penalty on first lien ARMs that are closed after June 30, 2009. Creditors are to provide a homeowner protection notice to applicants for a mortgage loan and are prohibited from the improper influencing of real estate appraisers.
MORAL
A word to the wise if you are licensed to do mortgages in Indiana.
INDIANA PROHIBITS LAWSUITS WITHOUT A PRE-SUIT NOTICE BEFORE FILING A COMPLAINT TO FORECLOSE ON REAL PROPERTY
FACTS
Effective July 1, 2009 Indiana requires lenders and servicers to provide a pre-suit notice prior to filing a complaint in a foreclosure action. The pre-suit notice must inform the debtor that the debtor is in default, encourage the debtor to obtain assistance from a mortgage foreclosure counselor, and contain the contact information for the Indiana Foreclosure Prevention Network. The pre-suit notice must be provided to the debtor at least 30 days prior to filing a complaint in a foreclosure action. In addition, the bill provides a debtor the right to schedule a settlement conference during foreclosure proceedings. Lenders and servicers filing an action to foreclose a mortgage on a debtor's primary residence are required to include with the complaint a notice informing the debtor of the right to participate in a settlement conference. The notice must inform the debtor that the debtor may schedule a settlement conference by notifying the court within 30 days of the date the notice is served.
MORAL
Remember to start foreclosure earlier since you have to give the notice 30 days before you file for foreclosure. Or modify the loan if that is possible.
KANSAS INDICTS MISSOURI WOMAN FOR MORTGAGE FRAUD
FACTS
Amanda E. Childs is charged with four counts of bank fraud. The crimes are alleged to have occurred in 2002 and 2003 in Wyandotte and Johnson Counties in Kan.
According to the indictment, in 2002 and 2003 Childs took part with other people in a scheme to submit false and fraudulent loan applications and property appraisals to lenders in order to obtain mortgage loans. The conspirators transferred funds obtained unlawfully into bank accounts they controlled for their own use. The conspirators used the following Kansas businesses to defraud the lenders: Heritage Financial Investments, Legacy Enterprises, Atlantic Mortgage Inc., The Real Estate Group, J.T.F. Enterprises, Liberty Escrow, T.E.R.M. Appraisers, Approved Mortgage, The Mortgage Connection, Apex Appraisals, Ryan Miller Appraisals, LLC, Midwest Appraisals, Pinpoint Appraisals and Summit Appraisals. They submitted to lenders false representations of borrowers' income and employment, false lien information, false occupancy statements, false sales contracts and false notarizations of loan documents. Conspirators also submitted false property appraisals including inflated property valuations and forged signatures of appraisers.
According to the indictment, Childs took part in submitting fraudulent loan applications on four houses.
If convicted, she faces a maximum penalty of 30 years in federal prison and a fine up to $1 million on each count. (usattyks61909)
MORAL
The federal people went back seven years to find these fraud loans. Anyone out there do fraud loans in the last seven years?
MARYLAND REQUIRES PRIOR NOTICE ON FORECLOSURES AND EVICTIONS
FACTS
As of May 19, 2009 Maryland requires foreclosure notices for occupants of residential property in foreclosure. An "Important Notice" must be sent to the address of the residential property at the time the order to docket or complaint to foreclose is filed. A "Notice of Impending Foreclosure Sale" must also be sent to the address of the property not earlier than 30 days and not later than 10 days prior to the date of sale. In addition, the purchaser of the property is required to send an "Important Eviction Notice" to the address of the property after the entry of a judgment awarding possession and prior to any attempt to execute the writ of possession.
MORAL
Basically if you are going to foreclose in any state whatsoever it needs to be checked for new laws related to foreclosure and eviction so your quality control person needs to be on their toes as well as your attorney. Foreclose improperly and get sued alternatively.
MICHIGAN REQUIRES 90 DAYS NOTICE BEFORE YOU CAN FORECLOSE ON REAL PROPERTY
FACTS
Effective July 5, 2009 Michigan requires a foreclosing party to serve a written notice on the borrower prior to commencing a nonjudicial foreclosure on homestead property. The notice must state: the reasons the mortgage loan is in default and the amount that is due; that the borrower may request a meeting to attempt to work out a modification to avoid foreclosure; and that if the borrower requests a meeting, foreclosure proceedings will not be commenced until 90 days after the date the notice is served. A list of housing counselors prepared by the Michigan state housing development authority must also be attached to the notice. If a borrower contacts a housing counselor but the process does not result in an agreement to modify the mortgage loan, the foreclosing party must work with the borrower to determine if the borrower "qualifies" for a loan modification. The bill sets forth the standards to follow when making such a determination. If the determination is that the borrower is eligible for a loan modification, the foreclosing party may proceed to foreclose the mortgage nonjudicially only if: the foreclosing party has in good faith offered the borrower a modification agreement; and for reasons not related to any action or inaction of the foreclosing party, the borrower has not executed and returned the modification agreement within the required timeframe.
MORAL
Not only do you have to prove the mortgage is assigned to you and recorded if you are not the original lender but now you have to jump through more hoops to foreclose. Legal Aid will make the lenders life miserable with this one.
OHIO U. S. ATTORNEY CHARGES PERSON WITH 12 FRAUDULENT MORTGAGE LOANS
FACTS
On June 23, 2009 William J. Edwards, United States Attorney for the Northern District of Ohio, announced that an information has been filed against Paul R. Tomko charging him with one count of mail fraud in connection with mortgage loans that were obtained fraudulently.
The information alleges that from August 2003 through January 2005, Tomko and others who were not named executed a scheme to defraud Homecoming Financial Network and People's Choice Home Loans in connection with twelve mortgage loans. The information further alleges that Tomko and others caused fraudulent loan applications to be processed through mortgage brokers, including CMS Home Loans in Elyria, Ohio, and Allstate Financial Group in Beachwood, Ohio. The information charges that Tomko utilized straw buyers to purchase properties and to obtain financing in their names. The information further charges that Tomko caused fraudulent appraisals to be prepared.
The information also alleges that the loan application packages that were submitted to the lenders included some or all of the following false and fraudulent documentation and information: inflated appraisals, source of down payment, rental income, lease agreements, and forged signatures. The information charges that Tomko and others fraudulently obtained twelve mortgage loans totaling nearly $1.2 million. It is further alleged that Homecomings Financial Network and People's Choice Home Loans sustained significant losses as these mortgage loans went into default and the properties were sold through foreclosure. If convicted he could do significant time in federal prison depending on the loss and other factors. (usattyndohio62309)
MORAL
He is innocent until proven guilty but do you really want to spend that much money to prove you are innocent? Note the loans go back six years. Anyone out there do questionable loans within the last six years?
SOUTH CAROLINA ENACTS THE MORTGAGE LENDING ACT
Effective January 1, 2010 the Mortgage Lending Act requires mortgage lenders and mortgage loan originators employed by, compensated by or appointed as an agent of a mortgage lender to obtain a license under the SCMLA, unless exempt. Loan processors or underwriters acting as an independent contractor for a mortgage lender must also obtain a license under the SCMLA, unless exempt. The MLA establishes requirements for fees, bonds, exemptions, renewals, continuing education, examinations, notification, advertising, escrow accounts, disclosures and recordkeeping. All application forms, solicitations and advertisements to contain the NMLS unique identifier of the person originating the mortgage loan.
The name of the act is changed to the "Licensing of Mortgage Brokers Act" and amends requirements under for fees, bonds, exemptions, renewals, continuing education, examinations, notification, advertising, escrow accounts, disclosures and recordkeeping.
The Consumer Protection Code is amended to change the definition of a "supervised loan" to exclude mortgage loans. As such, mortgage lenders making junior lien loans at a rate of interest in excess of 12% are no longer required to obtain a license under the CPC. (alrgs62309)
MORAL
Don't you just love all these changes in the laws for most if not all the states? There must be at least 100 new laws over all.
IF YOU WOULD LIKE A PRINT OUT VIA E MAIL OF THE NEW LAWS BY YEAR END THE COST WILL BE $175 AND IF ENOUGH OF YOU ARE INTERESTED WE WILL SEND OUT THE INVOICES AND SEND YOU EMAIL VERSION OF SUMMARIES, THE LAWS AND EFFECTIVE DATES WHEN ALL THE CHANGES ARE IN. BUT WE WILL NEED AT LEAST 100 PEOPLE BECAUSE IT IS A LOT OF WORK. LET ME KNOW IF YOU ARE INTERESTED AND WE WILL PUT IT TOGETHER IN READABLE E MAIL FORMAT.
ALABAMA NO LONGER REQUIRES BRICK AND MORTAR PRESENCE FOR MORTGAGE BROKERS
FACTS
Effective Aug. 21, 2009 Alabama amended the Mortgage Brokers Licensing Act. Mortgage brokers are no longer required to maintain a principal place of business in Alabama. The renewal fee exemption for brokers who broker more than 50% of loans to low and moderate-income borrowers is also eliminated. Several exemptions from licensing under the MBLA are also eliminated. (alrgs609)
MORAL
If you were one of the exemptions, I suggest you read the new law.
CHASE/WAMU SUED IN CALIFORNIA CLASS ACTION FOR FREEZING HOME EQUITY CREDIT LINES
FACTS
Chase Bank and its acquired division Washington Mutual Bank have been illegally freezing customers' home equity lines of credit across the country. This is the allegation in a federal class action lawsuit entitled Kimball v. Washington Mutual Bank et al., No. 3:2009-cv-01261, (S.D. Cal. June 9, 2009, filed by Michell Kimball, a small business owner in Escondido, Calif.
The class-action complaint, filed in the U.S. District Court for the Southern District of California, says Chase and WaMu intentionally used faulty formulas that undervalued customers' homes, providing a false basis for lowering credit limits. Federal law prohibits banks from reducing home equity credit limits without a "sound factual basis" for concluding that the home has significantly declined in value, the complaint says.
The suit, filed by Michell Kimball, who took out a $500,000 home equity credit line but later learned that Chase had frozen her account. When she contacted the bank's customer service department, a representative said her property value had dropped to about $731,000 and that a value of at least $812,700 was necessary to reinstate her credit line, the complaint says. Kimball obtained an appraisal valuing the property at $1.15 million, well over Chase's valuation, and the bank eventually restored her credit line, the suit says.
Kimball filed the suit on behalf of herself and other Chase and WaMu customers whose home equity credit lines have been reduced or suspended based on "dubious" valuation formulas. According to the complaint, the companies have sent form letters to thousands of home equity credit line customers saying their credit lines were being suspended because of a decline in the value of their homes. The letters said the determination was based on a "proven valuation method" but gave no details of the banks' calculations, the complaint says. As a result, the defendants have "denied their customers access to hundreds of millions of dollars worth of credit at a critical time," according to the lawsuit.
.
MORAL
Easy. If Chase or WAMU or for that matter any other bank froze your equity line of credit based on alleged reevaluations and you have a legitimate appraisal showing you are within the proper credit line, then you may have a lawsuit also against your bank or be part of the Chase/WAMU lawsuit.
CALIFORNIA REVERSE MORTGAGE ELDER PROTECTION ACT OF 2009.
FACTS
AB 329 is out of the assembly and now in the Senate. Existing law provides a disclosure notice that a lender must provide an applicant, which informs the applicant that a reverse mortgage is a complex financial arrangement and advises the applicant of the wisdom of seeking financial counseling before entering the agreement. Existing law prohibits a lender from referring a borrower to anyone for the purchase of an annuity. Existing law requires a lender to refer a prospective borrower to a housing counseling agency for counseling, as specified, prior to accepting a final and complete application for a reverse mortgage or assessing any fees.
The bill would prohibit a lender or any other person who participates in the origination of the mortgage from participating in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity. This bill also prohibits a lender or any other person who participates in the origination of the mortgage from referring a prospective borrower to anyone for the purchase of other financial or insurance products, except as specified. The bill would require the lender to provide the prospective borrower with a list of not fewer than 10 nonprofit counseling agencies in the state that have been approved by the U.S. Department of Housing and Urban Development for counseling. The bill would require a lender to provide a borrower with a checklist specifying issues the borrower should discuss with a reverse mortgage counselor or, if the borrower seeks counseling prior to requesting a reverse mortgage loan application, the bill would require a mortgage counselor to provide the checklist. The bill would require that the counselor sign the checklist, if the counseling is done in person, and the prospective borrower, with a copy provided to the borrower. The bill would prohibit approval of the loan application until the signed checklist is provided to the lender.
MORAL
This bill is a lawsuit waiting to happen against mortgage brokers and lenders and the potential for mortgage fraud is great. Remember: 1-YOU ARE ALREADY PROHIBITED FROM SENDING THE BORROWER TO ANYONE THAT SELLS ANNUITIES. 2-THE BORROWER MUST GO TO COUNSELING BEFORE YOU ACCEPT A COMPLETED LOAN APPLICATION. If this bill passes, you are not allowed to have anyone in your employ that refers reverse mortgage borrowers to anyone for the purchase of financial or insurance products. Additionally you cannot approve a loan application until the signed checklist is received from the mortgage counselor.
Lawyers will be very willing to sue brokers and lenders for any violation if this passes due to the ease of proof. It is very easy to prove the violations by lack of documents and dates. See your attorney for a one-page protection declaration from the borrower to minimize the possibility of lawsuits.
CALIFORNIA DEPARTMENT OF REAL ESTATE LICENSEE HAS LICENSE REVOKED BECAUSE OF THREE MISDEMEANOR CONVICTIONS
FACTS
Real Estate Commissioner Jeff Davi issued a decision revoking Lance Robbins's license as a real estate broker, based on three criminal convictions for misdemeanor violations of the fire protection and prevention provisions of the Los Angeles Municipal Code, all strict liability offenses to which Robbins had entered pleas of nolo contendere. Robbins sought a writ of mandate in the Superior Court requiring the commissioner to set aside the decision revoking his license. The trial court denied Robbins's petition. Robbins appealed.
The 2nd Appellate District of the Court of Appeals said affirmed. Section 490 of the Business and Professions Code permits the revocation of a license on the ground that the licensee has been convicted of a crime, if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the license was issued.
Robbins was licensed as a real estate broker, and is also an attorney. On Jan. 23, 2001, he pled nolo contendere and was convicted of three misdemeanor violations of the fire protection and prevention provisions of the Los Angeles Municipal Code -- unlawful obstruction of buildings, failing to test a fire signal system, and failing to inspect fire extinguishers. Robbins was fined $100, placed on summary probation for 18 months and required to pay investigative costs incurred by the Fire Department. The record of conviction of a crime is conclusive evidence only that the conviction occurred, but the DRE may inquire into the circumstances surrounding the commission of the crime in order to fix the degree of discipline or to determine if the conviction is substantially related to the qualifications, functions, and duties of the licensee in question. (B&PC §493).
A substantial relationship existed between Robbins's 2001 convictions and the qualifications, functions or duties of a licensee. The code violations arose out of Robbins's ownership and/or management of apartments; Robbins indicated this was a very profitable business; and his convictions resulted from his failure to take care of health and safety requirements for the tenants of the apartments. This met the requirements described in the DRE's regulations, which state that a substantial relationship is established by the "[d]oing of any unlawful act with the intent of conferring a financial or economic benefit upon the perpetrator or with the intent or threat of doing substantial injury to the person or property of another." (Cal. Code Regs., tit. 10, § 2910, subd. (a)(8).)
A determination that a licensee's conviction justifies discipline "requires a reasoned determination that the conduct was in fact substantially related to the licensee's fitness to engage in the profession." (Donaldson, supra, 134 Cal.App.4th at p. 955, fn. omitted.) As Donaldson explains, licensing authorities do not have unfettered discretion to determine whether a given conviction is substantially related to the relevant professional qualifications. Licensing authorities are required to develop criteria to aid them in making that determination. (§ 481.) The Department's criteria appear in section 2910 of title 10 of the California Code of Regulations. As applicable here, those criteria state:
"When considering whether a license should be denied, suspended or revoked on the basis of the conviction of a crime, . . . the crime . . . shall be deemed to be substantially related to the qualifications, functions or duties of a licensee of the Department . . . if it involves: . . . (8) Doing of any unlawful act with the intent of conferring a financial or economic benefit upon the perpetrator or with the intent or threat of doing substantial injury to the person or property of another." (Cal. Code Regs, tit. 10, § 2910, subd. (a)(8).)
Here, as the ALJ observed, the code violations of which Robbins was convicted arose out of his ownership and/or management of apartments, and Robbins himself indicated this was a very profitable business. (robbins v. Jeff Davi as Real Estate Comm'r, 6-23-09, B199013, 2nd app.dstrt)
MORAL
Effective Jan. 1, 2008, section 10177, subdivision (b) was amended to eliminate the reference to moral turpitude, so that it now provides that a real estate license may be revoked if the licensee has entered a plea of guilty or nolo contendere to, or been found guilty of, or been convicted of, a felony, or a crime substantially related to the qualifications, functions, or duties of a real estate licensee.
Do not get convicted of any crime and do not plead guilty until your attorney has informed you of the potential effect it may have on any professional license you may have first. Pleading guilty or nolo contendre may get you probation and not jail time but it may cost you your ability to make a living by loss of your real estate license.
THREE CHARGED WITH MORTGAGE FRAUD IN ORANGE COUNTY, CALIFORNIA
FACTS
Kathy Chen, Richard Salgado Gonzalez and Daniel Gonzalez are charged with 154 felony counts including one count of conspiracy, 47 counts of grand theft, one count of attempted grand theft, 40 counts of forgery, 30 counts of recording false documents, 30 counts of identity theft, one count of elder financial exploitation, and four counts of forging an official seal.
If convicted, the defendants face a sentence ranging from two years up to 109 years in state prison. Chen was arrested on June 1, 2009 on a $3 million warrant and must prove the money is from a legal and legitimate source before posting bail. A warrant has been issued for the arrest of Richard and Daniel Gonzalez.
Chen worked as a real estate broker and owned three businesses including Chen Financial, KC Realty, and SBC Financial. She is accused of conspiring with her then-boyfriend, Richard Gonzalez, and his brother, Daniel Gonzalez, to commit over $17.5 million in fraud by recruiting and paying "straw buyers" to obtain mortgage loans for the purchase of multiple properties.
Between Jan. 13, 2005, and July 10, 2007, the defendants are accused of obtaining 47 fraudulent loans in excess of $17.5 million through the use of straw buyers' credit on 35 properties. These properties included 13 in Orange County, 16 in San Bernardino County, and six in Kern County. The defendants are being prosecuted in Orange County for all 35 properties.
Chen, Richard Gonzalez, and Daniel Gonzalez are accused of acquiring city business licenses for nonexistent businesses under the pretense that the businesses were owned by the straw buyers to make them eligible for higher income loans.
They are accused of fabricating loan applications to reflect higher incomes for the straw buyers, forging the names and signatures of straw buyers on various deeds and loan documents, and forging the seal and notary stamp on a variety of notarized documents and deeds, which were then fraudulently filed with the Orange County Clerk-Recorder's Department.
The defendants are accused of using the personal and credit information of some of the straw buyers, including an 89-year-old woman, on several occasions without the knowledge or consent of the straw buyers, who had only agreed to one property purchase.
Acting as the escrow company, the defendants are accused of making some monthly payments on the loans to prevent suspicion by the lender. They are accused of then defaulting on the loan and keeping the excess loan money.
Warrants have been issued for the arrest of the Gonzalez brothers.
MORAL
A straw buyer is liable criminally as well if they knowingly do not intend to live in or make the payments on the property. Remember, everyone is innocent until proven guilty. I hope she has enough money to show that it is not from the loans so she can make bail or afford an attorney that understands the industry, because 109 years in a state prison is an awful lot of time if convicted.
FTC ADDS MORE DEFENDANTS TO THE LOAN MODIFICATION LAWSUIT FILED IN LOS ANGELES
FACTS
The Federal Trade Commission filed an amended complaint adding several new defendants in the action currently pending against Federal Loan Modification Law Center LLP, and six related defendants. The original complaint, filed on April 3, 2009, charged the defendants with misrepresenting that in exchange for a large up-front fee, they will obtain a mortgage loan modification or stop foreclosure in all or virtually all cases, and by misrepresenting that they are affiliated with or endorsed by the U.S. government.
The amended complaint adds the following defendants to the case: Venture Legal Support, PLC; Federal Loan Modifications; SBSC Corporation; and Steven Oscherowitz. FTC alleges that the additional defendants participated in the challenged practices independently and as part of a common business enterprise. The amended complaint also adds MGO Capital and Legal Turn LLC as relief defendants. Relief defendants are individuals or entities that did not participate in the alleged deceptive practices, but financially benefited as a result. (ftcprrel62609)
MORAL
Instead of settling the FTC has added more people. I trust they have enough money to defend. The FTC is like a bulldog. Once it bites, it does not let go until done. Do you do loan modifications? Do you advertise it? Are you licensed? Do you promise or imply more than you have delivered? See your attorney to stay out of trouble. I guarantee the attorney advice on the front end is a lot cheaper than the lawsuit on the back end.
COLORADO MAN ACCUSED OF MORTGAGE FRAUD
FACTS
Danny N. DeGrande, a suburban Denver real estate agent and another man are accused in a federal indictment of mortgage fraud involving about $1 million of loans on 22 residential properties in Pueblo.
DeGrande was once was a co-owner of the Colorado Ice indoor pro football team in Loveland. DeGrande and co-defendant John M. Scherling allegedly defrauded several mortgage lenders of hundreds of thousands of dollars each in 2004 by obtaining loans based on false statements the men made on loan applications for the properties. Scherling, listed by federal authorities as a Denver resident, allegedly took the role of a purchaser to obtain the loans
The former Rocky Mountain News reported in 2008 that DeGrande's real estate transactions in Pueblo and the Denver area led to more than 150 foreclosures and millions of dollars of losses. The newspaper said he is a Pueblo South High School graduate and a former prison guard who once had two Porsches and a million-dollar home in Centennial.
The indictment charges DeGrande and Scherling with 22 counts of fraudulently obtaining loans on the properties. Scherling is charged with six counts of money laundering and DeGrande is charged with three counts of money laundering.
In addition to whatever sentence the men receive, if convicted, the government is seeking to have them forfeit $908,944 to the government because it is the amount allegedly "derived from proceeds traceable" to the charged crimes.
The Rocky Mountain News reported that the Colorado Division of Real Estate took away DeGrande's real estate license in April 2008 and quoted the division's director as characterizing DeGrande's real estate deals as "revolting." The newspaper said DeGrande's deals in Pueblo and the Denver area cost one real estate appraiser his license and put another under investigation. The newspaper said his home was in foreclosure, he had to give up ownership in the football team, and his Porsches were repossessed (pueblochief62509)
MORAL
Two Porsches are gone and no more. The hunt goes back to 2004. If he gets convicted he is looking at prison time like never before.
VERMONT CHANGES LICENSED LENDERS ACT AND FORECLOSURE RULES
FACTS
Effective July 1, 2009 Vermont amended the Licensed Lenders Act. Mortgage loan originators and loan processors or underwriters acting as independent contractors are required to obtain a license under the LLA, unless exempt. Education, bonds, fees, exemptions, renewals, notifications, advertisements, recordkeeping, examinations and disclosures are also changed. Mortgage holders must file a notice of foreclosure with the commissioner of the Department of Banking, Insurance, Securities and Health Care Administration at the time the mortgage holder files an action to foreclose. (alrgs609)
MORAL
Keep track of the bills that pass, such as this. There are over 500 bills affecting mortgage loans and brokers nationwide by state and by federal law and the greater majority affect your ability to make a living. If you do not contribute to your mortgage broker/lender association PAC you may regret it by Jan. 1, 2010. Contribute now.
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.
