SOME CRITICAL PARTS OF THE "HELPING HOMEOWNERS SAVE THEIR HOME ACT"
FACTS
Senate Bill 896 became Public Law No: 111-22.
1. Section 203. Prohibits approval of an applicant as a HUD/FHA approved mortgagee if any of its officers, partners, directors, principals, managers, supervisors, loan processors, loan underwriters, or loan originators are: (1) currently suspended, debarred, otherwise restricted, indicted or convicted of certain offenses; (2) engaged in nonconforming business practices; (3) subject to unresolved findings of a HUD audit, investigation, or review; (4) convicted of real estate- or mortgage loan-related felonies during the preceding seven years, or at any preceding time of certain other felonies; or (5) in violation of specified laws or requirements.
2. Section 203. Requires an approved mortgagee to notify HUD immediately if sanctions are applied to it or any of its personnel (including revocation of a state-issued mortgage loan originator license or similar declaration of ineligibility under state law).
3. Section 203. expand the existing process for reviewing new applicants for participation in FHA-insured mortgages on one- to four-family residences; and (2) implement procedures that expand the number of mortgages originated for mortgagees that were approved during the 12 months before enactment of this Act. Has conditions of no violations of S.A.F.E. Act at time of application. If you are new or received your approval on or after May 2008 or your comparison ratio is over 150%, I highly recommend you have me do a HUD compliance audit on you now before HUD does it for you and decides to pull your FHA approval.
4. Section 404. Amends TILA to require additional disclosures which the new owner or assignee of a debt must furnish to the borrower within 30 days after the date on which a mortgage loan is transferred or assigned to a third party.
5. Section 702. Allows tenants to stay in foreclosed property for term of lease or 90 days. In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this Act, the immediate successor in interest in the property pursuant to the foreclosure shall assume such interest subject to: (1) provision by such successor of a notice to vacate to a bona fide (non-mortgagor) tenant at least 90 days before the effective date of such notice; and (2) specified rights of such tenant to occupy the property until the end of the remaining lease term.
6. Section 704. In the case of an owner who is an immediate successor in interest pursuant to foreclosure during the initial term of a lease, the tenant's vacating of the property prior to sale shall not constitute other good cause for terminating the tenancy or occupancy rights of the victim of domestic or similar violence or stalking. Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice.
In the case of foreclosure on any federally-related mortgage loan or on any residential real property in which a recipient of public housing assistance resides, the immediate successor in interest assumes such interest subject to: (1) the lease between the prior owner and the tenant, and (2) the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit. (generally good law to 12-31-2012}
MORAL
There is a lot of stuff here. If you are considering becoming HUD/FHA approved, do it now. If you are HUD approved, there is an upgrade in HUD audits in the new act and we should audit you now for compliance before HUD does it later.
If you are going to be a HUD REO owner let us review the existing lease for compliance or have your attorney do it. Tis better to let them stay until you are sure you do not violate this new law than to evict and have a lawsuit or worse yet a class action lawsuit depending on the number of REO properties you have.
A REMINDER THAT HUD LIMITS FHA LOANS TO ONLY 30% OF AVAILABLE UNITS IN A CONDOMINIUM PROJECT
FACTS
One of the new restrictions spelled out by the Department of Housing and Urban Development in its Mortgagee Letter 2009-19 states that "no more than 30% of the total units" in a condominium project may be purchased with an FHA loan.
Another rule specifies, "at least 50% of the (condominium) units must be sold prior to endorsement of any (FHA) mortgage on a unit."
The rule that says no more than 10% of the units may be investor-owned. That also applies to developers and builders that subsequently rent out vacant and unsold units. The regulations are set to take effect Oct. 1, 2009 (sdbusjl82409)
MORAL
What HUD giveth with the one hand, it can take away with the other.
ARIZONA INVESTOR CONVICTED OF MORTGAGE FRAUD
FACTS
Mario Bernadel of Phoenix, was convicted on Sept. 8, 2009 on 19 counts of Conspiracy to Commit Mail, Wire, and Bank Fraud; Mail Fraud; Wire Fraud; Bank Fraud, and Transactional Money Laundering as a result of his involvement in a cash back mortgage fraud scheme. Sentencing is set before U.S. District Judge Stephen M. McNamee on November 30, 2009.
Bernadel played a leadership role in the underlying conspiracy which involved at least 32 residential properties in the greater Phoenix area. The objective of the conspiracy was to recruit unqualified borrowers as straw buyers, submit fraudulent loan applications on their behalf, obtain mortgage loans in excess of the selling price of the property and then take the excess amount of the loans out through escrow in what is known as a "cash back" scheme. The defendant recruited and/or trained mortgage brokers, straw buyers and an escrow officer in the scheme to defraud and then benefitted from their involvement in the scheme.
Following the funding of the loans, Bernadel received cash back that he used to live a lavish lifestyle and further perpetuate the scheme. All of the homes purchased through the conspiracy have been foreclosed or sold at a loss to the lending institutions. Seven other co-conspirators were also charged and have pleaded guilty for their involvement in the conspiracy. They will be all sentenced over the next few months. The conspiracy resulted in approximately $20,000,000 in loans obtained by fraud and a loss to lending institutions of more than $2,000,000.
A conviction for Conspiracy to Commit Wire, Bank, and Mail Fraud carries a maximum penalty of 30 years in federal prison, a $1,000,000 fine or both. In determining an actual sentence, Judge McNamee will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.
Bernadel's conviction is part of initiative called "Operation Cash Back," in which 40 defendants were indicted and arrested, including many real estate professionals in June 2008. Bernadel is the 20th defendant to date who has been convicted through "Operation Cash Back." (usattyaz9909)
MORAL
Since he was the leader from the above he is looking at doing heavy time. And there is no parole in the federal system.
CALIFORNIA ATTORNEY GENERAL ARRESTS THREE MORTGAGE BROKERS FOR LOAN FRAUD
FACTS
Attorney General Edmund G. Brown Jr. today announced that agents from his office have arrested Michael McConville, and two of his associates for their roles in a criminal conspiracy to steal nearly $1 million from borrowers seeking to refinance their homes.
Per the Attorney General's office, McConville and his co-conspirators lured dozens of borrowers into refinancing home loans by falsely promising low interest rates and brokers' fees, and other attractive terms. They then negotiated different terms with lenders, forged the victims' signatures on the final loan documents and collected hefty brokers fees -- ranging from $20,000 to $57,000 -- that were never disclosed. Only when the borrowers received true copies of the loan documents after the refinance did they discover that their names had been forged. In total, defendants stole over $950,000 from more than 70 borrowers, leaving victims holding $30 million in loans with terms they did not agree to.
"After victims signed their closing papers, McConville and his associates doctored the loan documents, forged borrowers' signatures and slipped in hefty fees that were never disclosed," Brown said. "This was not some clerical error but a criminal conspiracy to steal nearly a million dollars from borrowers."
Earlier during the week of Sept. 10, 2009, Brown filed 44 criminal charges against:
Michael McConville of Simi Valley, sales manager of ALG, Inc, a Los Angeles based mortgage company. McConville was arrested at his home and is being held in Ventura County Jail on $2 million bail.
Garrett Holdridge of Palmdale, Calif. and Texas, loan officer for ALG, Inc. Holdridge is being held at the Los Angeles County Jail (Palmdale Station) on $2 million bail.
Alan Ruiz of Huntington Beach, a loan officer for ALG, Inc. Ruiz was arrested at his home and is being held at Orange County Sheriff's Main Jail on $2 million bail.
The charges include: 28 counts of grand theft, 14 counts of forgery, one count of elder abuse, one count of conspiracy to commit grand theft, three special allegations of aggravated white-collar crime in excess of $500,000, and taking in excess of $3,200,000.
From April 2007 to October 2008, McConville and his associates provided homeowners closing documents bearing terms promised, but which the lender never approved. After homeowners signed those documents, key pages were removed and replaced with pages bearing the terms that the lender had actually agreed to. The homeowners' signatures were forged on the replacement pages, and ALG forwarded the forged documents to the escrow company.
Homeowners only discovered they had been defrauded when they received the final loan documents with the true terms and saw their signatures forged on disclosures of closing costs, Truth-in-Lending disclosures, loan applications and other documents. ALG often collected between $20,000 and $30,000 in undisclosed broker fees. In one transaction, they collected over $57,000 in such fees.
As a result of this scheme, homeowners suffered devastating financial losses. Some were forced to sell their homes, come out of retirement, or tap into retirement savings. Others paid significant prepayment penalties, in one case, over $21,000. Borrowers often never received the significant amounts of cash-out they were promised.
Michael McConville promised one couple a 5.5% fixed interest rate, cash-out of $58,000 and $4,500 in closing costs. Only after they signed the documents, they realized their copy did not include the pages detailing the key terms of the loan. The couple soon received loan documents from Indymac Bank and discovered their signatures had been forged and they had received a 7% interest rate, no cash-out, and over $50,000 in closing costs, including a $42,000 origination fee paid to ALG.
ALG contacted a 65-year-old retired woman in July 2007 and promised her a 30-year fixed rate loan at 5.25%. A month later, a notary had arrived at the victim's house with loan documents reflecting the 5.25% fixed interest rate. After closing, the victim discovered she had received an adjustable rate mortgage with an initial rate of 8.65%, a $22,000 origination fee, and $2,230 in miscellaneous fees. The victim's signature had been forged on most of the documents.
Mr. Brown recently sued Michael McConville and his brother Sean for their part in the "Property Tax Reassessment" scam which targeted Californians looking to lower their property taxes. Tens of thousands of mailers were sent out that featured official-looking logos and demanded hundreds of dollars in payments for property tax reassessment and reassessment appeal services. The statements warned homeowners that if payments were not received by the "due date" they faced late fees or would have their file marked "non-responsive" or "ineligible for future tax reassessments."
In July 2009 Mr. Brown filed suits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Mr. Brown has sought court orders to shut down 32 companies and has brought criminal charges and obtained lengthy prison sentences for deceptive mortgage consultants. (caagnewrel91009)
MORAL
Some of you are aware of the prior releases and lawsuits by Attorney General Brown. Some of you have followed my advice as your attorney and are not in trouble. Some of you have not read the e-alert and are now suffering the "pangs and arrows of outrageous fortune" or should I say misfortune. Others, of you have done nothing wrong and just read and thank the lord you are not in any of the positions of the people in this news alert and the one immediately below. If you have questions consult your attorney now. Our attorneys are available to assist you as you believe necessary if you do not have an attorney.
TWO CALIFORNIA HARD MONEY MORTGAGE BROKERS INDICTED. LOSSES COULD EXCEED $100 MILLION
FACTS
A federal grand jury indicted David Arthur Nilsen and Manoel Antonio Errico, of Monterey, Calif., with conspiracy to commit mail and wire fraud, mail fraud, wire fraud, and securities fraud. Nilsen was arrested after surrendering to authorities in San Jose, Calif., on Sept. 10, 2009.
The indictment accuses Nilsen and Errico of defrauding investors in Cedar Funding, a Monterey-based hard money lender, in connection with investments in loans purportedly secured by deeds of trust and in a fund that invested in those same loans. According to the court document, Cedar Funding had more than 1,000 investors and the loss to those investors could exceed $100 million.
The indictment further alleges that Nilsen and Errico defrauded investors in fractional interests in loans secured by deeds of trusts, and in Cedar Funding Mortgage Fund, LLC, by making materially false statements, failing to disclose material facts, and creating a materially deceptive and misleading scheme, plan and artifice to defraud. The indictment alleges in part that, through, among other things, documents provided to investors, advertisements, interest payments and verbal communications, Nilsen and Errico created the false and misleading appearance that the investors' funds were invested in sound, secured real estate loans, which offered high returns and safety of principal. In truth, by in or about 2004 and increasingly thereafter, most of the loans were not performing, and the investors' funds were not secure. As borrowers increasingly failed to pay off loans, Nilsen and Errico, without the investors' prior knowledge or consent, extended the loan maturity dates and advanced more investor funds, which caused the loan balances to balloon beyond the initial loan amounts, diluted the investors' fractional interests in the loans and increased the likelihood that they would lose some or all of their principal.
The indictment also alleges that, unknown to investors; the source of a substantial part of the interest that Nilsen and Errico caused Cedar Funding to pay to existing investors came from new investors' funds rather than from performing borrowers.
Nilsen was released after executing a co-signed bond of $1 million. Errico is a fugitive.
Nilsen and Errico are named in each of the 31 counts alleged in the indictment. They face 20 years in prison plus fines on several of the counts
The court may also order that the defendants to pay restitution, if appropriate. (usattyndca91009)
MORAL
Two One is if you are hard money broker where the loans are going into default see your knowledgeable attorney now rather than later. Two is see him now to try mitigation as opposed to later when it becomes restitution.
CALIFORNIA REAL ESTATE AGENT ARRESTED IN SIMI VALLEY ON GRAND THEFT COMPLAINT FILED IN VENTURA COUNTY
FACTS
On Sept. 10, 2009 District Attorney Gregory D. Totten announced that the Real Estate Fraud Prosecution Unit has filed a felony complaint against John William Vanderwall III of Simi Valley. The complaint charges Vanderwall with one count of grand theft. It is also alleged that in the commission of the crime, more than $50,000 was taken.
Vanderwall was arrested in Simi Valley, in an operation conducted by the Ventura County District Attorney's Bureau of Investigation. Vanderwall currently is a licensed real estate agent employed by Plum Financial Group Inc. of Simi Valley. The charge of grand theft is based upon Vanderwall obtaining $65,000 under false pretenses from the alleged victim in early 2007.
Ventura County Superior Court Judge David Worley set bail at $10,000. If convicted, Vanderwall faces a maximum of four years in prison. (venthracohnthda91009)
MORAL
He is innocent until proven guilty but the cost of proving innocence can be expensive.
CALIFORNIA AB 764: IT IS MY OPINION THE GOVERNOR WILL SIGN
FACTS
The following is a very brief summary of the bill as enrolled. Remember, if the Governor signs it (and I sincerely believe he will) the law will be effective on Jan. 1, 2010. It is not urgency legislation and therefore it gives the broker time to still be in compliance with the advance fee agreements as allowed by DRE.
The following code sections are amended, repealed or added as indicated. Cal. Bus. & Prof. C. §§ 10085, 10085.5, 10133.1 amended. Cal. Bus. & Prof. C. §§ 6106.4, 10085.6 added. Civil C. § 2944.6 added.
6106.4-Attorneys cannot charge advance fees for real estate loan modifications or they will be subject to discipline by the State Bar of California.
10085-Any and all advance fee agreements fore any reason used by real estate licensees must be pre-approved by the Real Estate Commissioner. All advertising in any form related to advance fees must be pre-approved. No advertising can state or imply it is endorsed by any governmental, nonprofit, charitable or seniors organization. Violators subject to $2,500 fine and/or 12 months in jail.
10085.5-unlawful for any person to claim, demand, charge, receive, collect, or contract for an advance fee (1) for soliciting lenders on behalf of borrowers or performing services for borrowers in connection with loans to be secured directly or collaterally by a lien on real property, before the borrower becomes obligated to complete the loan or, (2) for performing any other activities for which a license is required, unless the person is a licensed real estate broker. Exceptions for CFL and RMLA licensees as indicated in code. Violations punishable by $20,000 fine/12 months in county jail or both. Corporations can be fined up to $60,000.
10085.6-licensed real estate broker cannot contract for, claim, demand, charge, receive, or collect a fee paid for by the borrower for loan modification agreements on residential single family 1-4 units until the terms of that loan have been modified. (Notice I did not say owner-occupied). Form notice in exact language prescribed by Department of Real Estate to be given to borrower before entering into any loan modification agreement. Give notice in language of the borrower. Start and end of each loan modification performance must be given to Real Estate Commissioner. Certain exceptions for CFL and RMLA licensees. Penalties for violation can be $20,000 fine and/or 12 months county jail.
Civ.C. § 2944.6-No one can collect an advance fee for loan modifications at all with exceptions. Penalties for violations. (ab764 as enrolled)
MORAL
This is literally a very brief summary and a warning. If you are going to be involved with loan modifications after Jan. 1, 2009 be sure to consult a knowledgeable attorney first or you may risk jail later.CALIFORNIA PASSES SAFE ACT BILL IT GOES INTO EFFECT IMMEDIATELY ON THE GOVERNOR'S SIGNATUREFACTS
This bill requires licensing for a separate identifier pursuant to the National Mortgage Licensing System Registration Act. It adds, deletes and modifies over 90 code sections involving Department of Real Estate licensees, California Finance Lender Licensees and Residential Mortgage Lending Act Licensees. CFL and RMLA licensees must have all their loan originators registered pursuant to the NMLS no later than July 1, 2010. DRE licensees must be in compliance no later than Dec. 1, 2010. What follows is an exceedingly brief summary of the changes to get into compliance.
This bill requires a real estate license endorsement from the commissioner in order to engage in the business of a mortgage loan originator as of Dec. 1, 2010. There are penalties if a real estate licensee fails to obtain a license endorsement before conducting business as a mortgage loan originator and the commissioner is authorized to suspend or revoke a real estate license for a failure to pay these penalties.
A license endorsement as a mortgage loan originator is required on each real estate license and each person is required to furnish specified background information to the Nationwide Mortgage Licensing System and Registry. The standards for issuance and renewal of a license endorsement to act as a mortgage loan originator, including satisfying specified educational requirements. Additionally, these real estate licensees must annually submit business activities reports, and other reports that may be required, to the commissioner. The commissioner is authorized to examine the affairs of real estate brokers, including those that obtain license endorsement as a mortgage loan originator. The commissioner is required to report violations of the provisions regulating real estate brokers and mortgage loan originators to the Nationwide Mortgage Licensing System and Registry. Recipients of a license endorsement as a mortgage loan originator must use or disclose a specified unique identifier provided by the Nationwide Mortgage Licensing System and Registry in advertisements and solicitations of the mortgage loan originator.
This bill requires the licensure and regulation of mortgage loan originators under the California Finance Lenders Law and the California Residential Mortgage Lending Act effective July 1, 2010. Requires mortgage loan originators to be licensed and registered through the Nationwide Mortgage Licensing System and Registry. Applicants for licensure as a mortgage loan originator must furnish specified background information to the Nationwide Mortgage Licensing System and Registry and applicants are required for licensure or license renewal to satisfy certain requirements, including educational requirements. Requires finance lenders and brokers, and residential mortgage lenders and servicers, that employ a mortgage loan originator to maintain a minimum net worth of $250,000.
Authorizes the commissioner to require finance lenders and brokers, and residential mortgage lenders and servicers that employ a mortgage loan originator to submit reports of condition to the Nationwide Mortgage Licensing System and Registry. Prescribes prohibited acts and authorize various types of disciplinary action to be taken against mortgage loan originators and requires the commissioner to report violations of these provisions to the Nationwide Mortgage Licensing System and Registry. Authorizes the commissioner to establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry for the purposes of implementing these provisions of the bill.
Requires a mortgage loan originator to use or disclose a specified unique identifier on all mortgage loan applications, solicitations, or advertisements. Provides that no person is required to have a mortgage loan originator license under the California Finance Lenders Law or the California Residential Mortgage Lending Act before July 1, 2010, nor a mortgage loan originator license endorsement under the Real Estate Law, as set forth in the bill, before Dec. 1, 2010. (sb 36)
MORAL
Requires you to get a real estate license with the endorsement before July 1, 2010 if you cannot meet the $250,000 net worth as a CFL licensee. So go get the license unless of course you have the $250,000 net worth under your CFL license.
SB 94 ENROLLED AS EMERGENCY LEGISLATION; WHEN THE GOVERNOR SIGNS IT, NO MORE ADVANCE FEES AND YOU MUST COMPLY
FACTS
This involves 11 code sections that will take effect immediately in California on the governor's signature. If you need advice on the bill then you may retain us as you deem necessary. In summary the sections state:
California Business and Professions Code Sections-
6106.3-Attorneys must give notice if doing loan modifications prior to any written agreement with the borrower and must do so in borrowers' language of negotiation. Attorneys may not collect advance fees for loan modifications. Violations subject attorneys to discipline.
10026-Defines advance fee. Provides cannot break advance fee up into any form of component parts. Applies to a fee for a listing, advertisement or offer to sell or lease property.
10085-Allows commissioner to require prior approval of any advance fee advertising in any form to be submitted for pre-approval before use.
10085.6-Provides loan modification or loan forbearance agreements may not provide for advance fees at all and cannot break the loan modifications or loan forbearance agreements into component parts and be paid for each part as it is completed. Cannot take any security for payment at all in any form. Provides that violation punishable by $10,000 fine and/or one year in county jail. $50,000 fine for a corporate violation. Covers single family residential 1-4 units. Notice I did not say any of them have to be owner-occupied. Excludes CFL, RMLA and attorneys but watch out for the other laws that in fact include these.
10147.6-provides for an advance notice to any person seeking loan modification and for notice to be in language used to negotiate. Provides for criminal penalties for a violation. Applies to residential 1-4 units. Notice does not state any one of them has to be owner-occupied.
Civil Code § 2944.6-Provides no one may represent anyone in loan modifications or loan forbearance without giving them a warning prescribed as to exact language and type size. Provides criminal penalties for violation. Civil Code § 2944.7-Provides cannot take any compensation in any form or security for compensation until after complete performance. Civil Code § 2945.1-Redefines "foreclosure consultant" to include among other things: Assist the owner to obtain a loan or advance of funds; Avoid or ameliorate the impairment of the owner's credit resulting from the recording of a notice of default or the conduct of a foreclosure sale. Excludes attorneys and licensed real estate brokers and salespeople under certain conditions. (sb94)
MORAL
Notice a lot of this is like AB 764 BUT it is urgency legislation. I can see room for a lot of confusion and exceptions and constitutional objections. However, to use them requires litigation and litigation requires someone or several or many to challenge constitutionality.
AB 329 ENROLLED CREATING REVERSE MORTGAGE ELDER ABUSE ACT
FACTS
Amends Civil Code Sections 1923.2 and 1923.5. Enacts the Reverse Mortgage Elder Protection Act of
2009. Prohibits prepayment penalties. Prohibits 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. 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. Requires 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 HUD for counseling. Requires 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, requires a mortgage counselor to provide the checklist if the borrower seeks the counselor out before applying for the loan. Requires that the checklist be signed by the counselor, if the counseling is done in person, and the prospective borrower, with a copy provided to the borrower. Prohibits approval of the loan application until the signed check list is provided to the lender. (ab 329 enrolled)
MORAL
Becomes law on Jan. 1, 2010 if Governor signs the bill and I am sure he will. Note that the above law appears to allow fixed maturity dates for reverse mortgages. However, remember to check HUD/FHA rules if it is a HUD Reverse mortgage and TILA, Reg Z, RESPA and other state laws to be sure there are no exceptions to putting fixed maturity dates. With a fixed maturity date a reverse mortgage may not be a good idea for quite a few people.
MARYLAND MAN DRAWS OVER SIX YEARS IN FEDERAL PRISON FOR FORECLOSURE PREVENTION MORTGAGE SCHEME AND AGREES TO FORFEIT OVER $2 MILLION
FACTS
U.S. District Judge Deborah K. Chasanow sentenced Michael K. Lewis of Takoma Park, Md. on Sept. 11, 2009 to 78 months in prison, followed by three years of supervised release, for conspiracy and bankruptcy fraud arising from a scheme in which he and his conspirators offered to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders. Lewis previously agreed to the entry of a forfeiture judgment of $2,228,878, generated as proceeds of the criminal activity and Judge Chasanow will rule on that and the restitution amount at a later date.
From at least 2004 until May 2008, 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
Lewis 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 goal of Lewis and his co-conspirators was to steal the homeowners' equity out of their property by inducing the homeowners to sell their property to Earnest Lewis and converting sale proceeds to the use of the conspirators. Lewis and his co-conspirators did this by fraudulently representing to the homeowners that their "lease/buy-back program" would help the homeowners to keep their homes. 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 only by paying inflated rent and fees by having their bank accounts directly debited to an account belonging to co-conspirator Cheryl Brooke's company "In the House Technologies." Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit.
Lewis, Earnest Lewis, and Thomas lied to the homeowners or omitted details as to the amount of money that the homeowners would receive at settlement, what would be done with any equity in the homes and the need to file for bankruptcy protection and failed to inform the homeowners of the particulars of how the lease/buy-back program worked.
Earnest Lewis of Takoma Park, was sentenced to 54 months in prison, for his role in the scheme. Earnest Lewis previously agreed to forfeit $2,228,878, generated as proceeds of the criminal activity and Judge Chasanow will rule and on that and the restitution amount at a later date.
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. 23, 2009 and Sept. 21, 2009, respectively. (usattymd91109)
MORAL
I have been saying for some time to see your attorneys now if anyone out there has been involved in "foreclosure prevention" or "foreclosure rescue" operations. He or she can mitigate the problem legally to some extent based upon the facts as some of you are aware. There are never guarantees but it sure beats waiting for law enforcement to knock on your door.
USING UNLICENSED LOAN ORIGINATORS IN NEVADA CAN COST YOU $5,000
FACTS
A proposed stipulation has been offered to Rocking Horse Ridge LLC dba Cedar Woods Financial, Suzanne Schoney and Joseph Schoney hereinafter Respondents.
Cedar Woods Financial was issued a mortgage broker license by the Division on May 14, 1997. Cedar is owned by Suzanne Schoney and Joseph Schoney.
The Division conducted an examination of Cedar on April 6, 2009; and
The MLD alleges in the proposed stipulation that the examination of the books and records of Cedar disclosed the following issues:
1. Respondents failed to refund monies as agreed for collection of discount fees that had not been used to lower the rate of interest on a loan, which was cited during Cedar's 2006 examination; the refund was made following the March 2009 examination.
2. Respondents allowed Coby Culley to transact loan originations on behalf of Cedar without proper licensure as a mortgage agent, in violation of NRS 645B.450(2). The examination concluded that Mr. Culley completed a mortgage agent application and provided it to the then qualified employee, Rochelle Sutherland; however, Ms. Sutherland failed to submit the application to the Division.
3. Respondents did not exercise proper oversight of the licensed office and did not ensure that the approved qualified employee, Ms. Sutherland, was present at the office to oversee the operations of the office, and that the qualified employee was transacting business in accordance with law.
4. Employment and deposit verifications, as well as loan applications, were signed utilizing the names and signatures of persons other than the person actually signing the document. Staff maintained that they had been directed by the qualified employee, Ms. Sutherland, to complete the documents in this manner in her absence.
5. On one loan reviewed, bank statements were submitted for underwriting which were altered slightly to remove references to transfers from savings to cover non-sufficient fund overdrafts (NSF), although the lender supported that the NSF would not have impacted its decision to fund the fully documented loan;
The proposed Stipulation and agreement is that the violations found during the examinations of Respondents' books and records and referenced herein, shall be settled on the following terms and conditions:
1. Respondents fully admit to violations of NRS 645B.450(2), as detailed above, although they relied on the former qualified employee, Rochelle Sutherland, to ensure all applicable persons were properly licensed.
2. Respondents agree to pay to the Division the amount of $250, for attorney costs related to this matter within 30 days from the date this Agreement is executed by the Commissioner. All Respondents are jointly and severally responsible for payment of the $250 in attorney's fees assessed above.
3. Respondents agree to pay to the Division a fine in the amount of $5,000 within 30 days from the date this Agreement is executed by the Commissioner. All Respondents are jointly and severally responsible for payment of this fine.
4. Respondents agree to exercise adequate supervision of the licensed office and to comply with the provisions of NRS 645B, including but not limited to, compliance with NRS 645B.450, by ensuring all applicable persons hold an active mortgage agent license. (mldweb9-13-09)
MORAL
When you own the shop, watch over the workers. They do not have as much of an incentive to keep in compliance as you do. This is an offer of settlement and respondents can object to the findings and request a hearing.
BEING UNLICENSED AS A MORTGAGE AGENT IN NEVADA CAN COST YOU $2,500
FACTS
The Mortgage Lending Division issued a mortgage broker license, #3072 to Silver Stream Financial, LLC on March 6, 2008; Coby Culley was the designated employee for Silver Stream and 50% owner, with Gina Faccenetti holding the remaining interest,
Silver Stream failed to renew its mortgage broker license by June 30, 2008 and the license was canceled. Silver Steams failed to pay assessments and fees owed to the Division as follows:
a. Attorney General assessment FY 2008, $560.44, plus late penalty, total owed $616.48;
b. CPA assessment FY 2008, $71.50 plus late penalty, total owed $78.65;
c. Examination fee, $348.78, June 2008, which includes a late fee.
Aside from his ownership interest in Silver Stream, Respondent Culley has not been issued any additional mortgage broker or mortgage agent licenses by the Division, and has not been approved to serve as a qualified employee for another licensee.
During a routine examination of Cedar Woods Financial in April 2009 it was discovered that Respondent was conducting mortgage activities in Nevada on behalf of Cedar without proper licensure from December 2008 to the present and accepted three loan applications, in violation of NRS 645B.400; and Respondent maintains he completed a mortgage agent license application in November 2008 and provided the application to Rochelle Sutherland, the designated qualified employee for Cedar; however, he claims that unbeknownst to him, the application was not submitted and the application was found in Ms. Sutherland's desk drawer during the April 2009 examination; and Respondent claims he did not know, and that it was not explained to him by Ms. Sutherland, that a mortgage agent applicant cannot conduct business until such time as the license is issued by the Division; and Cedar submitted Respondent for approval as Cedar's qualified employee on March 11, 2009; and
WHEREAS, pursuant to NRS 645B.400, "a person shall not act as or provide any of the services of a mortgage agent or otherwise engage in, carry on or hold himself out as engaging in or carrying on the activities of a mortgage agent unless the person has a license as a mortgage agent issued pursuant to NRS 645B.410" See, NRS 645B.400.
The Division has offered Respondent Culley a settlement that he acknowledges and agrees, with full knowledge, to waive its right to have the Division file a complaint and to go to a hearing in this matter.
He further agrees that the above-described actions constituted a violation of NRS 645B.400 and NRS 645B.670, although Respondent maintains, and the Division agrees, that Respondent's above-described actions may not have been intentional.
Respondent shall pay an administrative fine in the sum of $2,500 to the Division within 30 days of this Agreement being executed by the Commissioner of the Division. Respondent shall further pay all assessments and fees owed to the Division by Silver Stream within 30 days of this Agreement being executed by the Commissioner of the Division as follows: Attorney General assessment FY 2008, $560.44, plus late penalty, total owed $616.48; CPA assessment FY 2008, $71.50 plus late penalty, total owed $78.65; Examination fee, $348.78, June 2008, which includes a late fee; this amount has been submitted for collection which may result in additional costs or interest charges. Respondent will be required to contact the collection agency directly regarding payment of the examination fee. The Respondent must provide documentation satisfactory to the Division that payment has been remitted.
Subject to the requirements the Division will allow Respondent to serve as Cedar's qualified employee. Respondent must meet the prescribed standards in law for approval and must fully comply with the Division with respect to the qualified employee and/or mortgage agent approval process, including the immediate submission of a mortgage agent application. Respondent must further comply with all terms and conditions of this Agreement. Respondent shall not be deemed approved as the qualified employee until he receives approval in writing from the Division, which approval will be sent under separate cover if Respondent is otherwise qualified by law as determined by the Division. (mld website 9-14-09)
MORAL
Check to see the physical license is received by the company or it may cost you. Mr. Culley does have the right to reject the proposed stipulation and go to hearing.
SAN ANTONIO WOMAN IN FORECLOSURE PREVENTION SCHEME SENTENCED TO OVER 29 YEARS IN FEDERAL PRISON
FACTS
Rosario Divins of San Antonio, a self-proclaimed foreclosure prevention specialist, was sentenced to 350 months in federal prison for criminal contempt and mail fraud. In addition to the prison term, United States District Judge Fred Biery ordered that Divins pay $83,600 restitution to her victims and be place under supervised release for a period of three years after completing her prison term.
On June 17, 2009, a jury convicted Divins of seven counts each of criminal contempt and mail fraud. The jury found that since January 2000, Divins engaged in a fraudulent foreclosure prevention scheme. Testimony during the three-day trial revealed that Divins unjustly enriched herself by collecting over $80,000 in cash from individuals in desperate financial situations who responded to her mailout offering to stop their residential foreclosures. Divins continued to implement her scheme despite three separate sanctions from the United States Bankruptcy Court for the Western District of Texas ordering her to stop misrepresenting herself and making false promises to her clients. (usattywdtx91009)
MORAL
Did you notice that the federal prosecutors used mortgages that occurred over nine years ago! How $83,600 can earn you almost 30 years in federal prison where there is no parole.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
