48 STATES AND THE DISTRICT OF COLUMBIA NOW HAVE ENACTED THE SAFE ACT; 14 ARE IN EFFECT NOW
FACTS
The Secure and Fair Enforcement for Mortgage Licensing Act: Mortgage loan originators and loan processors or underwriters acting as independent contractors must obtain a license, unless exempt. There are requirements affecting renewals, fees, education, exemptions, examinations and notification. In addition, all application forms, solicitations and advertisements must contain the National Mortgage Licensing System unique identifier of the person originating the mortgage loan.
The two states that have not enacted the SAFE Act as of Aug. 13, 2009 are California and Minnesota. (nmn81309)
MORAL
As go the dinosaurs, so go the independent loan processors and underwriters unless they want to be licensed as agents.
MORTGAGE BROKERS BEING DECIMATED IF THE SAFE ACT IS ANY INDICATION
FACTS
Statistics presented in Savannah, Ga. at the American Association of Residential Mortgage Regulators' annual conference indicate that data compiled by the National Mortgage Licensing System indicate only 49% of the nearly 90,000 brokers licensed in 14 states signed up to be on the mandatory NMLS system. Worse, just 36% of those who went on to the NMLS have renewed their licenses.
The 14 states are the earliest adapters of the NMLS and have been on the system long enough to go through their first renewal period. They are: Connecticut, Iowa, Idaho, Kentucky, Louisiana, Massachusetts, Mississippi, Nebraska, New Hampshire, New York, North Carolina, Rhode Island, Vermont and Washington (nms81409)
MORAL
That's the bad news. The good news is there are 45,000 less competitors in 14 states, meaning more business for the remaining 45,000. So go to work people.
FORECLOSURES CONTINUE UPWARD TREND IN JULY 2009
FACTS
The number of U.S. households on the verge of losing their homes rose 7% from June to July 2009. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice, such as a notice of default or trustee's sale. Banks repossessed more than 87,000 homes in July, up from about 79,000 homes in June 2009.
Nevada had the nation's highest foreclosure rate for the 31st-straight month, followed by California, Arizona, Florida and Utah. The next five in line were Idaho, Georgia, Illinois, Colorado and Oregon. Among cities, Las Vegas had the highest rate followed by the California cities of Stockton and Modesto.
Banks have extended only 400,000 offers to 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000, or 9%, of the total eligible borrowers have enrolled in three-month trials in which their monthly payments are reduced. (azcent81309)
MORAL
Considering the reluctance of banks to grant loan modifications (about one in seven of those eligible) consider yourself lucky if you got one.
PHOENIX ESCROW OFFICER PLEADS GUILTY TO CASH BACK MORTGAGE FRAUD SCHEME
FACTS
Christopher S. Bartlemus of Phoenix pleaded guilty to conspiracy counts in two separate indictments on Aug. 10 and Aug. 12, 2009. In one case, Bartlemus pleaded guilty to conspiracy to commit wire, bank and mail fraud; in the other case, to conspiracy to commit bank fraud. Sentencing is set before Judge McNamee on Nov. 2, 2009 and Judge Campbell on Nov. 16, 2009.
Bartlemus' role in the conspiracy stemmed from his position as an escrow officer with Security Title Agency. During the charged conspiracies he facilitated cash back at closing to third parties who were unrelated to the transactions. He failed to disclose the assignment of these funds to the lenders. All of the homes where he facilitated a third party assignment, in violation of lender's instructions, have gone into foreclosure. Bartlemus is cooperating with authorities in the prosecution of others.
A conviction for conspiracy to commit wire, bank and mail fraud carries a maximum penalty of 30 years, a $1,000,000 fine or both.
Bartlemus' plea is part of initiative called "Operation Cash Back" where 40 defendants were indicted and arrested in June 2008, including many real estate professionals. To date, 16 of those defendants have entered guilty pleas. (usattyaz81209)
MORAL
Forty people are off the street and cannot now earn a decent living. If you have a question about it, see your lawyer first then you stay out of trouble.
CALIFORNIA FEDERAL JURY CONVICTS TWO OF MORTGAGE FRAUD INVOLVING OVER $40 MILLION
FACTS
On Aug. 10, 2009 a federal jury convicted Kyle Grasso, formerly of Santa Monica, and Lila Rizk, of Trabuco Canyon, of conspiracy, bank fraud and numerous loan fraud charges for their roles in the mortgage fraud scheme that involved losses of about $40 million. Additionally, Grasso was convicted of three counts of money laundering.
The evidence showed that Grasso and Rizk were part of a scheme that obtained inflated mortgage loans on homes in some of California's most expensive neighborhoods.
Eight other real estate professionals who were part of the scheme previously pleaded guilty to federal felony charges for their roles. They are:
The scheme's leader, Charles Elliott Fitzgerald, formerly of Newbury Park and Beverly Hills; Mark Alan Abrams, Los Angeles, who along with Fitzgerald orchestrated the scheme; Nicole LaViolette of Palm Springs; Jamieson Matykowski of Laguna Niguel; Timothy Holland of Santa Ana; Richard Maize of Beverly Hills; Thomas R. Schiff of Brentwood; and L. Scott Robinson of Dana Point. Fitzgerald was previously sentenced to 14 years in federal prison.
The scheme defrauded mortgage lenders by obtaining inflated mortgage loans on expensive homes in some of California's most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars higher than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.
The evidence presented at trial included proof that Grasso profited by collecting hundreds of thousands of dollars in commissions and concealed payments. The prosecution further presented evidence that Rizk profited by collecting hundreds of thousands of dollars in fees for providing inflated appraisals in the scheme.
Judge Pregerson is scheduled to sentence Grasso and Rizk on January 29, 2010. A third defendant who went to trial, Joseph Babajian, a Westside real estate agent, was acquitted on 13 criminal counts, and the jury was unable to reach a verdict on eight additional counts. United States District Judge Dean D. Pregerson declared a mistrial as to the eight counts (usatty81009cdca)
MORAL
They are looking at a long time in federal prison without parole. Now me, I would want the attorney representing Babajian!
CALIFORNIA HOME LOAN CENTER INC. dba LENDINGTREE LOANS DOES NOT PAY LOAN OFFICERS AND OTHERS CORRECTLY COSTING IT $4,000,000
FACTS
In a class action Daniel Gonzalez, David Nottingham and Jeffrey Howerton sued Home Loan Center, dba Lendingtree Loans, on behalf of themselves and other similarly situated employees. The employees held positions as mortgage bankers, equity specialists and loan officers. The employees contended they were not paid overtime, reimbursement for expenses, proper wage statements and not given breaks.
The Parties settled for $4,000,000. Don't you just love all those zeros before the decimal point? Maybe next time Lendingtree will spend the attorney fees to have a properly drawn employee agreement that will avoid this problem. For example, properly drawn outside salesperson agreements that are legally complied with do not require overtime. (06-5007, usdc-central- 12-18-09)
MORAL
So which is more expensive -- paying for the agreement or paying the lawyer to defend you because you did the agreement on the cheap by copying someone else's?
CONNECTICUT AMENDS DEFINITION AND RESTRICTIONS ON NONPRIME MORTGAGE LOANS
FACTS
Effective Oct.1, 2009 Connecticut amends the definition of nonprime home loan and related restrictions with respect to negative amortization, payment schedules, call provisions and default charges are established. In addition, mortgage fraud is now a state crime.
MORAL
Anyone doing nonprime loans? If so, let me know, I know quite a few brokers that would like to place them.
FLORIDA RESTRICTS MORTGAGE BROKERS AND AGENTS THAT ARE DOING LOAN MODIFICATIONS
FACTS
Effective Jan. 1, 2010 Florida imposes restrictions on mortgage lenders, brokers and loan originators performing loan modification services. A mortgage lender, correspondent mortgage lender, mortgage brokerage business, mortgage broker or loan originator may not engage in or initiate loan modification services without first executing a written agreement with the borrower. Borrowers have the right to cancel a loan modification agreement within three business days after signing the agreement. Lenders, brokers and loan originators are prohibited from executing a loan modification without the borrower's consent or securing payment prior to performing all loan modification services.
MORAL
Watch what you do. These new laws on loan modifications can even catch the good guys.
MARYLAND MAN GETS 6.5 YEARS IN FEDERAL PRISON FOR CONSPIRACY TO HELP BORROWERS STOP FORECLOSURE
FACTS
U.S. District Judge Deborah K. Chasanow sentenced Earnest Lewis of Takoma Park, Md., on Aug. 12, 2009 to 54 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud arising from a scheme in which the conspirators offered to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders. Lewis previously agreed to forfeit $2,228,878.
According to Earnest Lewis' plea agreement, from at least 2004 until May 2008, Michael Lewis aired television advertisements that targeted financially vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy. Viewers who called the toll-free number were scheduled to meet with Lewis, for a fee. At the meetings, Lewis solicited individuals to become MKL Associates and to purchase a variety of for-fee services, such as the Michael K. Lewis Financial Diet for reducing debt, as well as a pre-paid legal plan, income tax return preparation services and bankruptcy petition preparation.
Together with Michael Lewis, Earnest Lewis and Winston Thomas specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments. The co-conspirators fraudulently represented to the homeowners that their "lease/buy-back program" would help the homeowners to keep their homes. Michael Lewis and Winston Thomas, a senior loan officer with a mortgage lender, told the homeowners that the "good credit" of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes by paying "rent" and fees to Earnest Lewis. Their bank accounts were directly debited by an account belonging to co-conspirator Cheryl Brooke's company "In the House Technologies."
In order to induce lenders to provide funds for Earnest Lewis to purchase the homeowners' houses, Thomas prepared and Earnest Lewis signed loan documents containing false financial information as to Earnest Lewis' income and liabilities.
Cheryl Brooke, of Upper Marlboro, and Winston Thomas of New Carrollton, pleaded guilty to their participation in the scheme and face a maximum sentence of 20 years in prison for the conspiracy to commit wire fraud. Brooke also faces a maximum of five years in prison for bankruptcy fraud and Thomas faces a maximum sentence of one year in prison for failure to file a federal income tax return. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for Brooke and Thomas on Sept. 11, 2009 at 2:30 p.m. and Sept. 21, 2009 at 3:00 p.m., respectively.
Michael K. Lewis of Takoma Park pleaded guilty to conspiracy and bankruptcy fraud in connection with the scheme and is scheduled to be sentenced on Sept. 3, 2009 at 9:30 a.m. (usattymd81209)
MORAL
Here the government went back five years to find the fraud and the four people face a lot of time in prison including Cheryl Brooks up to 20 years. See your lawyer now if you were involved in any foreclosure or loan modification problems where you did not perform. Later may create even bigger proble3ms for you.
BANK OF AMERICA IN MICHIGAN FORECLOSES ON FAMILY OVER $0.07 MISTAKE WHEN FAMILY HAD JUST SUFFERED DEATH OF DAUGHTER
FACTS
A family is losing its home because it underpaid the mortgage by $0.07 in January, a legal aid group says. "The bank [Bank of America] seems more interested in having another empty house in Michigan than working with the family," Sydney Rooks, a lawyer for Legal Services of Eastern Michigan, said last week. Rooks said Creg and Bonnie Berger inadvertently underpaid their mortgage because a postal clerk issued a mooney order for $440 rather than $440.07. The couple didn't catch the mistake and they were four weeks late making February's payment of $690.07. She said they had been late before.
Though the Bergers caught up by mid-April, Rooks said, Countrywide Financial and its new owner, Bank of America, rejected the couple's payments. Bank of America countered that it and earlier loan servicers bent over backward to accommodate Bonnie Berger, who has been repeatedly delinquent since purchasing the modest four-bedroom frame bungalow for $38,650 in 1997. It said Berger rejected a reasonable offer last week to get reinstated.
"There is no story of a $0.07 foreclosure," Bank of America spokesman Rick Simon said. "The bank has made determined efforts through the years to help this borrower keep her home, including delaying the foreclosure." Consumer experts said they weren't surprised by Bergers' plight, given that Michigan ranked fifth nationally with 13,891 foreclosures in May 2009. They said the mortgage business has become cold and impersonal.
Rooks said Bonnie Berger, 34, a $12-an-hour nursing home aide, and her husband, 35, who has struggled to get his computer repair business off the ground, aren't model borrowers, but they're not deadbeats.
Negotiations to resolve the problem failed last week when the bank's lawyers offered to reinstate the mortgage for $8,390, including $7,171 to cover back payments -- $3,000 more than the couple has or owes, Rooks said.
On Thursday, Bank of America bought the house for $42,708 at a foreclosure auction. The couple has six months to come to terms with the bank or be evicted. Creg Berger said the foreclosure and the loss of their 10-month-old daughter in a household accident in April have devastated the family.
"There haven't been any highs, only lows," a tearful Creg Berger said. "We lost our daughter, now we're losing our home. I don't know how much more our family can take." (detroitfreepress8`009)
MORAL
Scrooge came early this year. Only the Bank of America makes Scrooge look good. The people lose a young daughter, they struggle but make up payments instead of being deadbeats and the bank says, hey I don't care I will foreclose over $0.07. Well why don't you take your business to another bank. Even Wells Fargo never foreclosed over $0.07 so far as I am aware.
MINNESOTA MAN PLEADS GUILTY TO MORTGAGE FRAUD LOOKING AT UP TO 30 YEARS IN FEDERAL PRISON
FACTS
Michael I. Striker of Minnetonka, Minn., pleaded guilty on Aug. 10, 2009 to one count of bank fraud and one count of money laundering.
The plea agreement notes that from March 2003 to September 2003, he executed a scheme to defraud Associated Bank and obtain money by means of false and fraudulent pretenses. Striker was the president and sole owner of U.S. Equities of Minnesota, a real estate company that entered into 21 real estate loans with the bank.
A co-defendant was a construction loan officer at the bank who processed and approved the loans, which totaled more than $4 million. Striker admitted those loans were approved based on false and misleading information he submitted. Striker also admitted giving his co-defendant a Rolex watch worth several thousand dollars for his services.
In total, Striker obtained more than $724,000 in cash back at the closings on the loans. Although the loans were purported to be for construction rehab projects, Striker admitted he used some of the loan funds for unrelated expenses and debts. Furthermore, Striker paid more than $100,000 in brokerage fees to a mortgage brokerage company even though it did not broker any of the loans. Specifically, on Sept. 3, 2003, Striker issued a $13,000 check from U.S. Equities, payable to River Run Properties, knowing the funds were derived from bank fraud.
Striker faces a potential maximum penalty of 30 years on the bank fraud count and 10 years on the money laundering count. Judge Ericksen will determine his sentence at a future date. (usattymd81109)
MORAL
Notice that the federal government went back six years to 2003 to get to the fraud loan. Has anyone out there been overly creative with loans since 2003? How about stated income loans? Especially in the 2005-2007 era? Not only is the federal government investigating and filing criminal charges but the lenders are actually suing the brokers and loan officers to buy back the loans or pay for the losses.
THREE FORMER MISSOURI MORTGAGE BROKERS PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Charles M. Davis of Rogersville, Mo., a former mortgage broker, pleaded guilty in federal court to his role in a $1.2 million mortgage fraud scheme.
Davis was the owner of Master Marketing Consultants. He admitted that he participated in two separate conspiracies to obtain mortgage loans for the purchase of homes based on false loan applications. Davis knew that the loan applications he prepared and submitted, or caused to be prepared and submitted, were false in that the loan applications included overstatements of income and understatements or omissions of liabilities, falsely represented that the purchaser/borrower intended to reside in the home to be purchased, and, in some cases, stated a false place of employment for the purchaser/borrower.
A significant portion of the loan proceeds was returned to the purchasers of the homes (who also were the borrowers) without the lender's knowledge and outside the closing of the home purchase.
Davis facilitated the return of loan proceeds to the purchasers/borrowers by routing the returned proceeds through Master Marketing Consultants and then, in some cases, through Metro Consulting Group.
Co-defendants Scott Allen Kassebaum, and his wife, Cheryl Joan Kassebaum, both of Ozark, Mo., have also pleaded guilty to their roles in one of the mortgage fraud conspiracies. The Kassebaums are former mortgage brokers and co-owners of Metro Consulting Group.
The readily provable economic loss attributable to Davis' criminal conduct is $1,271,590. The mortgage fraud schemes involved a total of 20 houses with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.
In addition to the two conspiracy charges, Davis pleaded guilty to two counts of wire fraud, related to the transfer of loan proceeds from the scheme, and two counts of money laundering, related to monetary transactions involving criminally-derived property.
Under federal statutes, Davis is subject to a sentence of up to 90 years in federal prison without parole, plus a fine up to $3 million and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office. (usattywdmo81309)
MORAL
This is a long time to spend away from your family. Do not do it. If you have see your attorney now rather than later.
USE AN UNLICENSED PERSON AS A MORTGAGE AGENT IN NEVADA AND PAY $10,000 ADMINISTRATIVE FINE
FACTS
The Commissioner of the Nevada Division of Mortgage Lending has offered a Stipulated Settlement Agreement to C2CL, Inc., dba Mayflower Financial. Mayflower is incorporated and licensed to operate as a mortgage broker in the State of Nevada. It has 63 licensed mortgage agents. Jennifer Callen Presley is the qualified employee of the company.
DML alleges in the proposed stipulation that on Sept. 24, 2008, the Division received a complaint alleging Mayflower allowed Peter Mills to originate a mortgage loan (Moore/Swift) without being licensed as either a mortgage agent or mortgage broker in Nevada.
An investigation per the DML established Mayflower employed Peter Mills and allowed him to originate the Moore/Swift mortgage loan in Nevada while not being licensed with the Division.
The Division also confirmed the Mayflower employed Diane Mills and allowed her to originate the Lane mortgage loan in Nevada while not being licensed with the Division.
The Division also determined that Mayflower was also sharing office space with a business licensed pursuant to Chapter 645 of NRS in violation of NAC 645B.032.
If Mayflower agrees to this Stipulation by the Division that the purported violations found during the Division's investigation and the Moore/Swift mortgage loan, referenced herein then the settlement in the main part is.
1. Mayflower admits it was negligent by associating with and/or employing Peter and Diane Mills as mortgage agents and allowing them to originate mortgage business in Nevada without being licensed in violation of NRS 645B.450(2) and also that it was negligent in sharing office space with a business licensed pursuant to Chapter 645 of NRS.
2. Mayflower shall, pursuant to NRS 645B.670 and/or NRS 622.400, pay to the Division an administrative fine in the amount of $25,000.
3. The parties agree, that the Division shall suspend the payment of $15,000 of the full fine for a period of 24 months from the date the Division executes the Agreement on condition that Mayflower fully complies with NRS Chapter 645B and NAC Chapter 645B and with each and every law and regulation applicable to it in its conduct of a mortgage broker. If within 24 months of the execution of this Agreement by the Division it is determined by the Division that Mayflower has violated the agreement the administrative fine levied against Mayflower shall revert to the originally specified sum of $25,000 and the remaining $15,000 shall become immediately due and payable to the Division. Payment of the initial $10,000 shall be made upon execution of this Agreement.
4. Mayflower shall pay investigatory costs directly related to the investigation of this case in the amount of $785. Payment shall be made upon execution of this Agreement. Mld81009)
MORAL
Presuming Mayflower Financial signs the proposed stipulation, it will have spent $10,000 to have two unlicensed agents do some loans. I hope the gross receipts for the loans done by the two agents exceed the cost of the fine or Mayflower has suffered a loss. I would suggest they get a quality control audit manual from us or someone else but get one and use it at least monthly. With 63 agents it is very easy to miss something and in some cases it can cost dearly.
NEW YORK ADOPTS MORTGAGE LOAN SERVICE REGISTRATION RULES
FACTS
As of June 24, 2009 New York adopted mortgage loan servicer registration rules. Mortgage loan servicers are required to maintain a minimum net worth of $250,000, a surety bond of at least $250,000 and a fidelity bond and errors and omissions insurance coverage of at least $300,000. The rules set forth requirements of experience, exemptions, fees and notifications.
MORAL
With those kind of bonds and net worth, goodbye to servicers in New York.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
