SAFE ACT LEGISLATION PASSED BY 26 STATES
FACTS
The states that have passed SAFE Act legislation to date are: Arkansas, Colorado, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Maryland (effective May 11, 2009), Mississippi, Montana, Nebraska, New Jersey, New Mexico, North Dakota, (effective Aug. 3, 2009) Oklahoma, South Dakota, Utah Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. The District of Columbia has also passed legislation effective Aug. 3, 2009.
MORAL
What does this mean to you? Most of the states have a transition period where it may be easier to move your current license now rather than later. So I would advise checking with your state licensing agency to see if you can transition now to avoid delays, the earlier the better. It can take several months with the new qualifications as for example credit, bankruptcies, past disciplinary action, etc. Find out now for future business planning rather than later where you have not left yourself room to plan alternatives.
LENDERS PAY HEED: A REMINDER ABOUT THE NEW TILA RULE AND NOT COLLECTING APPRAISAL OR OTHER FEES AT TIME OF TAKING THE LOAN APPLICATION
FACTS
The creditor must supply the preliminary truth in lending disclosures before loan consummation or within three business days of the taking of the loan application whichever is earlier but at least seven days before loan consummation. (This means the broker cannot collect or charge for appraisal fees until after the time has expired). This is for all loans subject to RESPA including single-family owner occupied whether purchase money or a refinance. If the disclosures are mailed then it is presume delivered three days after mailing and the charges to the consumer can occur on the fourth day.
The one exception is credit reports. You may charge the consumer for the initial credit report at the time of application.
If a new TIL must be given because the initial one is inaccurate according to Reg Z and no longer valid, the corrected disclosures must be given no later than three business days before consummation of the loan and at least seven business days from the initial disclosure before the loan closes.
If corrected disclosures are delivered by e-mail or courier other than the U.S. Postal Service, the creditor/lender can rely on proof of actual receipt of the presumed delivery three business days after mailing rule.
The new notice on the TIL must be "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application." It must be grouped with the other disclosures required by TIL (226.19(A)(1)(2)) (Thank you Weiner, Brodsky for such an excellent interpretation)
MORAL
The good news? The software will do most of it for you. But you will still have to count the days before charges are allowed.
FEDERAL RESERVE CREATING MORE PROBLEMS FOR MORTGAGE BROKERS
FACTS
The Federal Reserve Board is proposing new, tougher consumer friendly disclosure rules for mortgages and home equity loans. Is this a simpler regulation like HUD invented? You know. It is easier for a consumer to understand a four-page good faith estimate rather than a two-page good faith estimate. I never knew that to make something longer made it easier to understand.
Part of the FRB proposal is to restrict some bonus compensation going from the lenders to the mortgage brokers commonly referred to as a yield spread premium. This means the buyer has to come in with more cash that he does not have and therefore cannot buy the property. The proposed new rules have a four-month comment period. I suggest you join the broker association in your state and support the PAC committee to comment for you. Alternatively, you may be looking for a new vocation.
The article goes on to state the economy is stabilizing because the National Association of Realtors says sales are up 3.6% in June 2009 for the third consecutive month. Sales are up because prices keep going down. I do not know about you, but I do know in my own mind that the three and five year step ups from 2006 and 2007, (the years of stated income) have not all kicked in yet. I predict the fall-out will not recover until the latter part of 2012 as I have been saying for the past year. The Federal economist said 2009, then 2010 and now 2011. I still say as I have all along it will be the latter part of 2012. I hope I am wrong but I do not think so.
To go on with the FRB proposal, it is requesting originators and/or the mortgage brokers provide borrowers with a clear one-page explanation of how adjustable rate mortgages differ from fixed rate mortgages. The FRB wants clearer examples of the borrower costs on a loan. Lenders would have to notify borrowers at least 60 days before the adjustment (currently it is 25 days.) For home equity loans the notice would have to be 45 days in advance instead of the current 15 days.
Home equity lenders could reduce the line of credit or suspend it if the property securing the loan decreased in value 5% or more and the borrowers have paid off no more than 10% of the loan. Anyone that can predict that close is better than any appraiser I have ever heard of. It is like saying we are giving a boon to the consumer and it gives the consumer nothing.
The biggest concern is the one restricting YSP being paid from the lender to the broker (ocr72409p4.)
MORAL
It seems to me that Wall Street invented the mortgage-backed security for private industry and two people went to federal prison over it. It seems to me that lenders then advertised, yes encouraged stated income because they could sell it to Wall Street and I bet the lenders stopped serious underwriting and did little if anything to verify the income. Then the broker brought in the borrower that "stated" what he made. So blame the messenger.
REMINDER ON REVERSE MORTGAGES USED TO PURCHASE PROPERTY
FACTS
1. Borrower must occupy the new home within 60 days of closing as a principal residence.
2. Any prior FHA loans must be paid off before the new loan will be allowed.
3. All major repairs necessary to property must be completed before closing.
4. Down payments must be from legitimate source and not any interim type financing.
5. Construction must be completed on the property with certificate of occupancy. (ml 09-11)
MORAL
Read the mortgagee letter clearly and 4155. .1 REV 5 for clarification and detail to stay out of trouble on these loans because in this one lawyers opinion, HUD auditors will examine these loans very carefully for fraud.
PAY STATUTORY PENALTIES UNDER NEW FEDERAL LAW IF THE NEW LENDER TO WHOM THE LOAN IS ASSIGNED FAILS TO NOTIFY THE BORROWER WITHIN 30 DAYS
FACTS
The Helping Families Save Their Homes Act of 2008 requires assignees of owner occupied mortgage loans to provide a notice to borrowers in writing within 30 days of the assignment, sale or transfer of the note and mortgage of the identity, address and telephone number of the new creditor; date of the transfer; how the borrower may reach an agent or party having authority to act on behalf of the new creditor; the location of the place where the transfer of ownership of the debt is recorded and an other relevant information on the new creditor.
There is a penalty for the new creditor for failure to timely notify the borrower. Additionally, the servicer must provide the obligor with the name, address and telephone number of the owner or master servicer of the obligation (mortgage).
HUD COUNSELING FOR FHA HECM BORROWERS
FACTS
Counseling must be provided by an independent third party and the counselor cannot directly, or indirectly be associated with or compensated by any party involved in originating, servicing or funding the Federal Housing Administration Home Equity Conversion Mortgage loan. The counselor cannot be involved in the sale of annuities, investments, long-term care insurance or any other type of financial or insurance products.
The HECM borrower is to initiate contact with the counseling agency on their own and without any pressure or assistance from the lender. The lender cannot assist a senior in scheduling the counseling and cannot dial the number and hand the senior borrower the phone. The borrower must be provided with a list of at least 10 counseling agencies, five of which are local and or in the same state as the borrower and one of which is in driving distance for the borrower. In addition to the five local agencies the list must contain the following counseling services that can offer the counseling by telephone nationwide: National Foundation for Credit Counseling; Money Management International, Consumer Credit Counseling Service of Atlanta, the AARP and the National Council on Aging with the toll free numbers. ML 09-10)
MORAL
Anyone want to bet that the HUD auditor will be looking for this in the loan file and may even telephone the borrower to see who dialed the counselor?
I wish to thank Weiner, Brodsky for the information on licensing below. They have provided more detain than I have summarized. Below are the primary ones that can prevent licensing or get you in trouble for failure to disclose the unique NMLS identifier.
ARKANSAS LAW EFFECTIVE JULY 30, 2009 AMENDS BROKER REPORTING AND ADVERTISING REQUIREMENTS
FACTS
Licensees must put their full name, address and telephone number in all solicitations and advertisements. The unique NMLS unique identifier of the person doing the soliciting or originating of the mortgage loan must be included on all mortgage loan application forms, solicitations, advertisements, business cards and websites. Loan officer licenses will be rejected if the license has previously been revoked. Felony convictions will prevent licensing. Any convictions involving breach of trust, moral turpitude, money laundering, fraud, dishonest dealings within the previous 10 years will prevent receiving a mortgage loan officer's license. Additionally, any an offense involving mortgage lending or any aspect of the mortgage industry or any aspect of the securities industry or the insurance industry or any other activity related to financial services will prevent licensing as a loan officer.
MORAL
Throw the baby out with the bathwater. People who have rehabilitated for years from a felony conviction will not be able to renew licenses under this rule. And it is a national rule since most of the above is from the SAFE Act itself. If you need further clarification on licensing issues please give me a call.
CALIFORNIA HOME EQUITY SALES CONTRACT ACT ALLOWS BORROWER TO RESCIND SALES CONTRACT EVEN THOUGH HE SIGNED A RELEASE
FACTS
Lloyd owned and lived in a single-family residence in San Francisco. In May 2003 he was in default on his mortgage payments. Lloyd then entered into a sales-leaseback agreement with Hoffman where Hoffman purchased the property and immediately leased it back to Lloyd with an option to repurchase for two years. Lloyd signed the signed the grant deed and received the purchase price. At the time the home was in foreclosure and a notice of default had been recorded. Hoffman failed to give Lloyd the "notice of the seller's right to rescind the sales contract." Until the buyer complies with this obligation the seller may cancel the contract. This provision of giving this notice CANNOT BE WAIVED AND ANY WAIVER IS VOID AND UNENFORCEABLE.
Lloyd later defaulted on the lease payments and Hoffman filed for unlawful detainer to evict Lloyd. Before trial Hoffman and Lloyd entered into a settlement and BOTH OF THEM HAD LEGAL COUNSEL AT THE TIME OF THE SETTLEMENT. The release provided a general release against all known and unknown claims and expressly waived the provision of unknown claims set forth in Civil Code Section 1542. The release did not however, expressly refer to the Home Equity Sales Contract Act or to the existence of any claims under the HESCA. Four months later Lloyd filed Chapter 11 bankruptcy and recorded a document entitled "Notice of Rescission of Grant Deed Recorded Pursuant to Home Equity Sales Contract." Hoffman then sued in state court seeking cancellation of the notice of rescission and filed a cross-complaint against Hoffman seeking an accounting, quieting of title, and other relief. This was litigated in bankruptcy court. The bankruptcy court stated waivers of the HESCA must be knowingly and intelligently made and the court found that Lloyd was not aware of his HESCA rights at the time he signed the release and therefore he did not lose his right to rescind even though he signed a general release. Therefore the notice of rescission was valid.
Where an equity purchaser fails to provide a sale contract that complies with the HESCA, the right to rescind is not extinguished and survives even after the execution of a broad release of known and unknown claims. The buyer must show that the seller's HESCA rights were explained and the seller understood those rights.
In summary, the rescission of the foreclosed home was the order of the bankruptcy court by summary judgment. The district court affirmed this rescission because the buyer Hoffman never provided Lloyd with the notice of his rights required by HESCA. The district court held a general release signed by Lloyd during an unlawful detainer to evict him did not relinquish his HESCA rights because at the time of the settlement Lloyd did not have knowledge of these rights. Plaintiff appealed.
The 9th Circuit Court of Appeals said affirmed. There is no implicit waiver. If an owner-occupied home has a Notice of Default recorded then you comply or you lose the house back to the seller and the seller still has your money.
MORAL
He saved the money by not paying to consult with his attorney before the bought the property. This saved him money. Why pay the attorney a little now when I can pay him much more later to sue the owner, lose, pay the attorney to appeal, lose again and then lose the money I paid and lose the house as well.
CALIFORNIA INTERNAL REVENUE OFFICER INDICTED ON CHARGES HE URGED PEOPLE WHO OWED TAXES TO REFINANCE WITH A MORTGAGE COMPANY FOR WHICH HE WORKED
FACTS
Mark Claybrooks of Brentwood, Calif., a revenue officer for the Internal Revenue Service has been indicted by a federal grand jury on charges that he urged people who owed taxes to refinance with a mortgage company for which he worked. Claybrooks worked as an IRS revenue officer in Walnut Creek, contacting people who were delinquent with their taxes. From 2003 to 2005, he also worked for Faith Mortgage Group in Antioch, refinancing personal residence loans.
From 2002 to 2008, Claybrooks recommended to at least two people that they "pay off delinquent federal income tax obligations by refinancing with Faith Mortgage Group," according to an indictment by a grand jury in Oakland. Claybrooks received more than $20,000 from Faith Mortgage in exchange for the referrals, the indictment said.
He was charged with three counts of "acts affecting a personal financial interest" as well as two counts of fraud for allegedly using IRS computers without authorization. (sfchron72709)
MORAL
Innocent until proven guilty but to risk his entire career for $20,000! Even if he does no time in a federal prison he will have spent more than $29,000 for legal counsel. He will not have a decent job and if I remember the federal retirement system correctly because of this type of a felony conviction he loses his pension if any and if found guilty. But you have to admit, it was one heck of a way to find a good lead list except for the fact it is totally illegal.
FRESNO MAN ARRESTED FOR AMONG OTHER THINGS, MORTGAGE FRAUD
FACTS
Manual Mendoza Rodriguez was arrested in an arson case two years ago. Now he has been connected to dozens of fraud, theft and perjury cases after a two-year investigation, officials said. He was arrested the week of July 25, 2009, according to a complaint filed by the Fresno County District Attorney's Office. He is in Fresno County Jail with bail set at $1 million.
Rodriguez first came to the attention of authorities in 2007 after he allegedly set a house on fire in July 2007 on the 3900 block of East Liberty Avenue in southeast Fresno. The fire destroyed the home. He was arrested in October 2007 and booked on suspicion of arson, four counts of perjury, eight counts of grand theft and insurance fraud.
While Rodriguez was free on bail, fire investigator Christine Wilson was working with the Fresno County District Attorney's Office investigating Rodriguez. The new investigation ended with Rodriguez being arrested and charged with 13 additional counts of grand theft, 24 counts of forgery and a grand theft enhancement because the crime involved more than $200,000.
Investigators also discovered that since 2005, Rodriguez had taken out fraudulent bank and real estate loans totaling $2.3 million, said Don MacAlpine, Fresno's deputy fire marshal. Rodriguez is charged with theft from: Fresno Housing Authority, Indymac Federal Bank, Countrywide Home Loans, Fremont Investment & Loan and several mortgage and investment companies.
Rodriguez could face more than 50 years in prison and fines of three times the amount he allegedly defrauded, or $6.9 million, MacAlpine said (fresnobee72509)
MORAL
If guilty, he was a busy little bee, wasn't he?
IDAHO RULES FOR LOAN MODIFICATIONS AND LICENSING OF LOAN PROCESSORS AND UNDERWRITERS ACTING AS INDEPENDENT CONTRACTORS
FACTS
As of July 1, 2009 the Idaho Residential Mortgage Practices Act is changed. Among other changes to it are the act now governs loan modifications. Loan modifications must be by written agreement with the borrower specifying the fees to be charged, terms of the loan being modified, expected impact of the modification on the monthly payment and length of the loan. Renewals and original applicants for the loan officer license have restrictions against felony convictions in last seven years. Loan processors and underwriters being paid as 1099 independent contractors must obtain a mortgage loan originator license.
MORAL
If you are using an outside processor be sure to check to see they have a license or you could be in trouble. If you need further clarification on licensing issues please give me a call.
IOWA REQUIRES LOAN ORIGINATORS TO BE LICENSED AS WELL AS LOAN PROCESSORS AND UNDERWRITERS ACTING AS INDEPENDENT CONTRACTORS
FACTS
Effective Jan. 1, 2010, licensing for mortgage loan originators, loan processors acting as independent contractors and underwriters acting as independent contractors will be required to be licensed. If a previous license has been revoked, there if a felony conviction within the last seven years or any felony convictions involving fraud or dishonesty, breach of trust or money laundering will prevent licensure.
MORAL
You may ask why money laundering? Because in federal indictments for mortgage fraud the government generally adds a count for money laundering when you do not plead out. If you need further clarification on licensing issues please give me a call.
KANSAS AMENDS LOAN ORIGINATOR LICENSING LAWS
FACTS
Effective July 1, 2009, licensing is required for all loan originators as defined by the Act. This does not include loan processors or underwriters acting as such only and in no other capacity. Any loan originator that previously had a license revoked will not be given a license. Felony convictions in the last seven years or felonies involving fraud, dishonesty or money laundering will prevent licensing.
MORAL
If you need further clarification on licensing issues please give me a call.
KENTUCKY AMENDS LAWS TO GET INTO THE SAFE ACT
FACTS
Effective July 1, 2009, Loan processors acting as independent contractors (being paid by 1099) will have to be licensed. Any prior loan licenses revoked will prevent licensing for loan originators, no prior felonies for the last seven years and no felonies involving money laundering fraud, dishonest, breach of trust. The loan application of each borrower must contain the unique NMLS identifier of the loan officer. The NMLS identifier must be on all business cards, solicitations, advertisements and websites.
MORAL
I caution you that these are not the only changes. They are key ones though so you can prepare marketing plans. If you need further clarification on licensing issues please give me a call.
MARYLAND CHANGE MORTGAGE LICENSING LAWS
FACTS
Effective July 1, 2009, licenses expire annually on Dec. 31. No prior revoked licenses. No felony convictions in last seven years. No felony convictions involving dishonesty, money laundering, fraud or breach of trust.
MORAL
As usual there are other changes but these are key ones. Note how they follow the SAFE ACT! If you need further clarification on licensing issues please give me a call.
MISSISSIPPI CHANGES MORTGAGE LICENSING LAWS
FACTS
Licensing required for all mortgage loan originators and independent contractors performing loan processing and underwriting (means 1099 instead of W-2). Originators must reside within 125 miles of a licensed location. No prior license revocations and no felony convictions within last seven years and no felony convictions or misdemeanors involving mortgage fraud, theft, forgery, bribery or embezzlement. NMLS unique identifier must be on all loan applications, solicitations, advertisements, business cards and websites.
For all licensees that have a license subject to renewal before July 1, 2009, compliance is not necessary before Jan. 1, 2011. All others must comply as of July 31, 2010.
MORAL
All states are jumping on this bandwagon. So make your business plans now if you have not already. And I do mean now. If you need further clarification on licensing issues please give me a call.
MONTANA JOINS THE SAFE LICENSING ACT PARTY
FACTS
Effective July 1, 2009, no license if a similar license has been revoked, or if person has pled guilty to a felony in the last seven years or any felony involving fraud, dishonesty, breach of trust or money laundering.
The only good news is an in state office is no longer required but an in state resident agent will be required. Does this sound like Arizona? Can use minimum net worth in lieu of surety bond.
MORAL
At least Montana seems to allow a financial statement in lieu of a bond. If you need further clarification on licensing issues please give me a call.
NEBRASKA JUMPS ON BOARD FOR SAFE LICENSING
FACTS
Effective July 31, 2010, licensing required of loan originators as the other states. Never have had a license revoked. No misdemeanor convictions for fraud or dishonesty and no felonies. Must list NMLS unique identifier on all loan applications, solicitations and advertisements and business cards and websites.
MORAL
Note the consistency of all the states for licensing and restrictions. With minor differences they are all identical.
NEW MEXICO COMPLIES WITH SAFE ACT LICENSING REQUIREMENTS
FACTS
Effective July 31, 2009 and the licensing part is effective July 31, 2010. No license if a similar license has been revoked, or if person has pled guilty to a felony in the last seven years or any felony involving fraud, dishonesty, breach of trust or money laundering. License identifier on all business cards, loan applications, website and advertising. License is required of all independent contractor loan processors and underwriters.
MORAL
If you need further clarification on licensing issues please give me a call.
NORTH DAKOTA COMPLIES WITH SAFE ACT LICENSING
FACTS
Effective August 1,2009 SAFE Act requirements in force but licensing part takes effect Jan. 1, 2010 if already licensed Independent Contractor loan processors and underwriters must be licensed. No prior felony convictions. No prior revoked licenses. Advertising, business cards, website to carrier NMLS identifier. If you need further clarification on licensing issues please give me a call.
UTAH, VIRGINIA, WEST VIRGINIA FOLLOW SUIT ON THE SAFE ACT LICENSING ISSUES
FACTS
Remember, if you are going to renew or obtain a license in any of the above states you cannot have had one revoked previously, cannot have been convicted of felonies in last seven years, and must have NMLS unique identifier on all business cards, websites and loan applications. Loan processors and underwriters that act as independent contractors are required to be licensed.
MORAL
I have not covered the surety bond or education requirements because they are on the application for all states. I have covered areas that might prevent you from getting a license and areas where the license can get you in trouble if your fail to disclose the NMLS unique identifier on the appropriate documents and advertising. If you need further clarification on licensing issues please give me a call.
MISSOURI MAN PLEADS GUILTY TO
MORTGAGE FRAUD CAUSING NEARLY $2.7 MILLION IN LOSS
FACTS
Matthew Tucker, formerly of Lee's Summit, Mo., pleaded guilty in federal court on July 27, 2009 to his role in a nearly $2.7 million mortgage fraud scheme.
By pleading guilty Tucker admitted that he and others caused a number of mortgage lenders to provide financing for 45 loans involving 36 different properties, resulting in $2,695,883 in loss. Tucker was employed as a mortgage broker at various entities during the time frame of the offense. While Tucker was working at Empire Lending, an individual who was interested in purchasing duplexes as investment properties backed out of the deal. Tucker, believing that the duplexes would be a good investment, decided that he would prepare the loan paperwork to purchase the properties for himself.
Tucker, knowing that the loans would not be approved with his current financial situation, created phony W-2s, pay stubs, rental lease agreements, and bank statements to support the inflated income and asset numbers on the phony loan applications. Utilizing this scheme, Tucker purchased a number of rental properties. Tucker formed a company called KAE Management, which was created to manage the rental properties for Tucker and other individuals whom he assisted in obtaining rental properties utilizing the same scheme. Tucker created false and fraudulent loan applications for several of his extended family members, including his in-laws. In order to qualify them for loans, Tucker falsely inflated their salary on the loan applications. In several of the loan applications, Tucker falsely indicated that the borrower worked for KAE Management making a substantial salary. Additionally, at the time of closing, the HUD-1 forms often included a substantial payment of the loan proceeds from the lender to KAE Construction, which was intended to be used as money to make the mortgage payments on the properties until renters could be secured.
Under federal statutes, Tucker is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000. (usattywdmo72709)
MORAL
We do not mind representing you but in this case he brought his family into it? I wonder if they were charged. What is your opinion?
SIX CHARGED WITH MORTGAGE FRAUD IN NEW JERSEY
FACTS
On July 21, 2009, the FBI arrested Daniel Verdia, Don Apolito, Jaye Miller and Chrystal Paling. Two others surrendered on July 24, 2009, Robert Gorman and Philip Blanch. They were charged with a mortgage fraud scam operated out of an office in Hasbrouck Heights, N.J. The six defendants are each charged with one count of wire fraud, in a joint investigation between the FBI and IRS titled "Operation Follow The Money."
The investigation centered on activities occurring between February and September of 2005. According to the criminal complaint, the defendants obtained five mortgage loans by fraud between February and September of 2005 and deceptively converted the proceeds of those loans to their own use. This was done by first misrepresenting to the buyers and sellers the terms of the mortgage financing the purchase, the disbursements of the mortgage proceeds, and the source of the proceeds to pay off the mortgages, among other details. The second phase of the fraud involved falsifying information on the mortgage loan applications -- namely the income and assets of the purchasers on the loans, the source of the down payments on new purchases, and the disbursements of cash related to the mortgage proceeds. The defendants allegedly accomplished their misdeeds through numerous interstate wire transfers. In the end, the only people who made a profit were Verdia, Miller, Apolito, Gorman, Blanch, and Palings.
According to the complaint, Verdia has owned and operated mortgage brokerage companies since 2001, beginning with Challenge Mortgage Services LLC, Hasbrouck Heights. Challenge later became Monarch Mortgage Services, LLC, which eventually moved to Mahwah. In February of that year, Verdia and his associates closed Monarch and opened The Mortgage Exchange at the same address. While he operated Monarch at the Hasbrouck Heights location, Verdia also owned Capital Investment Strategies LLC which operated out of the same office and purportedly was the source of funds for Verdia's real estate ventures. According to the complaint, CIS is a shell company used by Verdia and his associates to fraudulently conceal money.
Defendant Jaye Miller has actively worked with Verdia since 2000 and has functioned as a loan officer and loan processor within Verdia's companies. Miller was also a 50% owner of CIS and endorsed checks made out to that entity -- monies that were allegedly proceeds of fraudulent activity. Robert Gorman has also worked in many of Verdia's businesses. Gorman obtained information from the mortgage applicants and processed the applications. This involved knowingly signing and submitting applications with false information, according to the allegations. Don Apolito has done business with Verdia since 2002 and operated a number of companies that supplied warehouse lines of credit that funded Verdia's alleged fraudulent transactions. All three of the companies operated by Apolito -- Nina Funding, Matrix Funding, and the Mortgage Exchange -- were operated out of Verdia's Hasbrouck Heights office. Additionally, the complaint alleges that Apolito also served the same function as Gorman: knowingly signing and submitting loan applications with false information. Attorney Philip Blanch closed all of loans in question. It was his responsibility to ensure the legality of the transactions and to verify the accuracy of the information in the closing documents and disbursement of funds. Blanch did this by signing the federal Uniform Settlement Statements forms involved in the transactions. However, the complaint alleges Blanch was well aware that information he "verified" on the HUD-1 statements was false. Crystal Paling worked for Blanch. The complaint alleges that Paling recruited individuals to purchase and sell the properties that were the subjects of fraud in this case. The complaint also alleges that Paling authored many of the documents associated with these transactions and facilitated the wire transfers to and from Blanch's trust account.
The following outline is based on allegations made in the criminal complaint. In the simplest terms, a victim home owner (two of which in this case were suffering financial hardship due to medical expenses) was convinced by one of the defendants named above to either sell or refinance his or her home through Monarch as part of a foreclosure bailout scheme. The defendants then recruited a straw buyer who was promised a sum of $5,000 for his or her participation. The defendants explained to the straw buyer that the original owner would repurchase the home after a short period of time when the owner had recovered from financial difficulties. The defendants also told the straw buyers that the mortgage payments for the newly purchased properties would be paid by Monarch. The defendants then falsified the financial information in the paperwork associated with the transaction. In one of the transactions, the falsified application was submitted to one of the companies under Apolito's control, Matrix Funding, for loan approval and then later sold to an outside mortgage company. But in all other cases, the fraudulent applications were submitted directly to outside mortgage lenders. Once the loans were approved, the mortgage lenders wired funds to Blanch's attorney trust account. At Blanch's direction, Paling would then wire all or most of the proceeds to CIS as a fee or payment. Three of the victim homeowners received no compensation whatsoever for the sale of their homes. One of those three victims suffering financial hardship was lead to believe he was refinancing his home when in reality; he sold it for a 100% loss. The other two victims received a fraction of the money they were legitimately owed. The defendants, however, all received financial compensation for each of the five transactions. None of the resulting mortgages from these five transactions were ever paid and all of them went into default. The total fraud in these five transactions is estimated at $1 million.
A criminal complaint is merely an accusation. Despite this accusation, every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt. (usattynewarknj72709)
MORAL
Innocent until proven guilty but oh the price of proving innocence! Did you notice the loans were over four years ago? Did anyone do bad loans like stated income since 2005? If so you may want to see your attorney.
VIRGINIA REQUIRES AT LEAST 10-POINT BOLD TYPE TO LET BUYER OR BORROWER KNOW OF RIGHT TO PICK OWN CLOSING AGENT
FACTS
Every contract concerning the purchase of real estate containing single-family 1-4 units must disclose in 10-point type the buyer or borrower has the right to pick the closing agent. The seller cannot dictate this to the buyer or borrower.
MORAL
Virginia has enacted several other laws regarding enforcement that you should read if you are in the mortgage industry. If you need them we are happy to discuss representation if you
EAGLE HOME MORTGAGE AUDITED BY HUD OFFICE OF INSPECTOR GENERAL AND FOUND WANTING
FACTS
Eagle Home Mortgage, Kirkland, Wash., did not always originate Federal Housing Administration-insured loans in accordance with Department of Housing and Urban Development requirements. Specifically, Eagle Mortgage did not follow HUD's underwriting requirements for 15 of the 36 FHA insured loans reviewed, three of which had deficiencies that affected the insurability of the loan. In addition, Eagle Mortgage did not adequately follow its HUD-approved quality control plan when reviewing loans with early payment defaults when it failed to review one loan, which defaulted after only four payments.
Four of seventeen quality control reviews performed by Eagle Mortgage did not find observable deficiencies in the loans. As a result, Eagle Mortgage management did not always have the accurate feedback needed to improve its loan origination process.
It was recommended that the Assistant Secretary for Housing - Federal Housing Commissioner (1) require Eagle Mortgage to reimburse or indemnify HUD for actual and potential losses on three loans with underwriting deficiencies, one of these loans has suffered a loss already of $91,280.00. (2) Review loans recently underwritten by Eagle Mortgage to verify that the underwriting deficiencies noted during our review are no longer an issue, (3) review Eagle Mortgage's monthly quality control reports to ensure that they include all FHA-insured loans that defaulted within the first six months, and (4) require Eagle Mortgage to conduct training on its quality control plan. (hudoigaudrpt72009-2009SE-1003)
MORAL
Eagle apparently had a good quality control plan but the person doing the quality control was not doing it properly. Remember, you need a good quality control plan and the person doing the quality control must follow the plan. If you do not have an up-to-date QC Plan you can purchase one from us.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
