Legal Corner

HUD/FHA PROPOSES TO INCREASE NET WORTH OF DIRECT ENDORSEMENT LENDERS TO $1 MILLION

FACTS

FHA Commissioner David H. Stevens Is quoted as saying FHA is trying to reduce its risk of future losses. The agency proposed new rules that include requiring lenders to have at least $1 million in cash and other assets, up from $250,000, to limit losses passed on to the FHA. It will cap refinancings at 125% of the current home value and stop certifying mortgage brokers to issue FHA-backed loans. (lat91909)

MORAL

Direct endorsement lenders keep track of this because if you have a problem meeting $250,000 net worth, think what it will be like at $1 Million. It means there is a greater likelihood that FHA can collect from you the loans you have indemnified. Remember, when you indemnify HUD, you do it for the "life of the loan." It is also a negotiable item depending on the facts.

FHA LOAN CORRESPONDENTS MAY NO LONGER HAVE TO MEET NET WORTH AND MAY NO LONGER HAVE TO REGISTER WITH HUD/FHA

FACTS

The Federal Housing Administration has decided that "direct endorsement" lenders should be fully liable for the mortgages they originate through loan brokers while saying that these third-party salesmen no longer need to register or meet the agency's net worth requirements. "Mortgage brokers will continue to originate FHA-insured mortgages through their relations with approved mortgagees," the agency said. "However, they will no longer receive independent FHA approval for origination eligibility." The new policy relieves brokers from filing audited financial statements with FHA. FHA is making this change as part of a risk reduction effort and refocusing of its resources. However, the agency is adopting a policy that prohibits brokers and commission-based lender staff from ordering appraisals. FHA commissioner David Stevens stressed that FHA is adopting appraisals policies that are consistent with the Home Valuation Code of Conduct but not the entire HVCC that Fannie and Freddie have adopted. (ON91809)

MORAL

This will "up" the production of DE lenders but increase their risk. I trust their quality control for fraud is in good shape. If not they should see us or someone like us to minimize the risk of loss.

EFFECTIVE JAN. 1, 2010 HUD/FHA FORBIDS MORTGAGE BROKERS FROM ADVANCING APPRAISAL FEES ON AN FHA INSURED LOAN

FACTS

Historically FHA prohibited mortgagees from accepting appraisal reports completed by an appraiser selected, retained or compensated, in any manner by real estate agents. FHA-approved lenders are now prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender's staff who is compensated on a commission basis tied to the successful completion of a loan. This is effective for all case numbers issued after Jan. 1, 2010. (ml09-28)

MORAL

Notice that it does not say the lender cannot advance the appraisal fee. It does not say the manager of a lender or an employee of the lender cannot advance the appraisal fee. Only the loan agent receiving commission cannot advance it. However the mortgage broker regardless of who gets the compensation cannot advance the fee. Remember, the mortgage broker is the corporation.

EFFECTIVE JAN. 1, 2010, APPRAISALS ARE FREELY AND MUST BE TRANSFERRED TO THE NEW FHA LENDER WHEN THE BORROWER ELECTS TO CHANGE LENDERS

FACTS

FHA prohibits "appraiser shopping." However, a second appraisal may be ordered by the second lender under the following limited circumstances:

For cases in 1 and 2 above, the lender must ensure that copies of both appraisals are retained in the case binder. For cases in 3 above, the first appraisal must be added to the case binder when it is received. In all cases, the lender must document why a second appraisal was ordered and retain the explanation in the case binder.Appraisal Transfer and Change of Client Name in Appraisal Report

In cases where a borrower has switched lenders, the first lender must, at the borrower's request, transfer the case to the second lender. FHA does not require that the client name on the appraisal be changed when it is transferred to another lender. The lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment.

Appraiser Selection in FHA Connection

Lenders must assure that the appraiser who actually conducted the appraisal that is used for an FHA-insured mortgage is correctly identified in FHA Connection. All this is effective Jan. 1, 2010. (ml09-29)

MORAL

Funny but I notice there is a problem even getting the file let alone the appraisal when the borrower changes from one FHA loan correspondent broker to another.

EFFECTIVE JAN. 1, 2010 HUD/FHA APPRAISALS WILL BE VALID FOR ONLY FOUR MONTHS

FACTS

The validity period for all appraisals on existing and proposed and under construction properties will be 120 days. This is effective for all case numbers issued after Jan. 1, 2010. (ml09-30)

MORAL

FHA may trust the appraiser, the appraisal, the broker, the lender but not the property. Interesting, FHA does not trust an inanimate object.

HUD/FHA HAS NEW COMPLIANCE REQUIREMENTS AND RESTRICTIONS FOR YOU TO ADD TO YOUR QUALITY CONTROL PLAN-EFFECTIVE IMMEDIATELY

FACTS

The Help for Home Savings Act of 2009, effective May 2009, establishes additional ineligibility criteria for FHA-approved lenders and mortgagees are effective now.

A lender or mortgagee shall not have any officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator of the applicant mortgagee who is:

Entities already approved by FHA will not be permitted to renew their status at the next annual recertification date if they are not in compliance with the above-listed eligibility criteria.Effective with the issuance of this mortgagee letter:

ADVERTISING MUST USE APPROVED NAME ONLYFHA-approved mortgagees must use their HUD registered business names in all advertisements and promotional materials related to FHA programs. HUD registered business names include any alias or "doing business as" on file with FHA. FHA-approved mortgagees must keep copies of all advertisements and promotional materials for a period of two years from the date that the materials are circulated or used to advertise.

All approved lenders are required to notify FHA if individual employees of the lender are subject to any sanction or any other administrative action. Lenders are required to notify FHA if there is a revocation of a State-issued mortgage loan originator license issued pursuant to the S.A.F.E. Act.

In addition to notifications already required by HUD Handbook 4060.1, REV-2, Chapters 2 and 6, FHA-approved lenders must notify FHA of the following business changes:

Civil Money PenaltiesFHA is authorized to pursue civil money penalties against:

The HFSH Act amended the definition of "knowingly" such that a person acts knowingly when he or she has actual knowledge of acts or should have known of the acts. (ml09 -31)MORAL

Update your quality control plans now. Update your audit manuals now. You can update it using the information in this e-alert or you can purchase a new one from us as you see fit.

ARIZONA BRANCHES OF DHI MORTGAGE SUFFER THROUGH HUD/FHA AUDIT WHERE RECOMMENDATION IS TO INDEMNIFY HUD AGAINST LOSS ON OVER $38 MILLION IN LOANS

FACTS

HUD-OIG audited FHA-insured loan processes at two DHI Mortgage Co. branches in Tucson and Scottsdale, Ariz., to determine whether DHI Mortgage originated, approved and closed FHA-insured single-family loans in accordance with HUD requirements.

DHI Mortgage was audited because the Scottsdale branch had a default rate that was double the default rate for FHA-insured loans for the state of Arizona. The audit was then expanded to include the Tucson branch because some loans had both branch numbers on the documentation.

DHI Mortgage did not follow HUD requirements for originating, approving, or closing FHA-insured loans. The audit review identified the following deficiencies: 205 loans with prohibited restrictive addendums to the purchase contracts; and 24 loans with significant underwriting deficiencies.

DHI Mortgage's quality control processes had weaknesses, including failure to determine that 19 loans were not eligible for FHA insurance because the loan officer had been debarred from participation in FHA-insured loan transactions.

HUD was recommended to require DHI Mortgage to (1) indemnify HUD for more than $38 million for loans that did not meet FHA insurance requirements, (2) refund or buy down FHA-insured loans for over-insurance totaling $15,749, and (3) fully implement a quality control plan in compliance with FHA requirements. (Audit Report No.: 2009-LA-1018, Sept. 10,2009)

MORALI have conducted HUD Audit seminars, audited clients for compliance and represented clients before the local HOC/s and the MRB over the last 20 years and still people do not listen. All you have to do is look at your comparison ration once a month and you will find out if you are going to be audited, you will find out which loan officers may be a problem and you will find out how to conduct the audit internally so that you do not get asked to indemnify more than $38 million in loans. That will put a dent in the financial statement.

SOME IMPORTANT RESPA REMINDERS ABOUT THE NEW GOOD FAITH ESTIMATE AND HUD-1/1A THAT YOU MUST USE STARTING JAN. 1, 2010

FACTS

1.      A loan originator (which includes a broker) must issue a Good Faith Estimate no later than three business days after the loan originator receives an application or information sufficient to complete an application. Application is defined as the submission of a borrower`s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include the following: (1) borrower`s name, (2) borrower`s monthly income; (3) borrower`s social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator. The broker can issue the GFE but the lender is responsible for its' content.

2.      The only charge that can be made before the GFE is given to the borrower is the cost of the credit report and no other charge whatsoever.

3.      If the borrower is taking out two loans for a purchase money mortgage (i.e. 80/20; 90/10. Etc.), the HUD-1 on the first loan at lines 204-209 should have the principal of the second mortgage listed and its purpose.

4.      Processing and administrative services include, but are not limited to: document delivery, document preparation, copying, wiring, preparing endorsements, document handling and notarization.

5.      If a revised GFE is issued only the following changes may be made: (1) --Charge or credit (points) for interest rate chosen; (2) --Adjusted origination charges; (3) --Daily interest charges; and (4) other interest rate related loan terms.

6.      If a borrower does not express an intent to continue with an application within 10 business days after the GFE is provided (or such longer time period specified by the loan originator), the loan originator is no longer bound by the GFE.

7.      When a loan originator permits a borrower to shop for third-party settlement services, the loan originator must provide the borrower with a written list of settlement services providers at the time of the GFE, on a separate sheet of paper. This is considered a referral under RESPA.

8.      If the borrower chooses a settlement service provider that is not on the loan originator's written list of providers, the amount paid for that service is not subject to a tolerance.

9.      Loan terms on the GFE can change based upon "changed circumstances." Changed circumstance include but are not limited to: (1) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; (2) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (3) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems. None of the information collected by the loan originator prior to issuing the GFE may later become the basis for a --changed circumstance upon which a loan originator may offer a revised GFE, unless the loan originator can demonstrate that there was a change in the particular information or that it was inaccurate, or that the loan originator did not rely on that particular information in issuing the GFE. The loan originator is presumed to have relied on the borrower's name, the borrower`s monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator before providing the GFE. The loan originator cannot base a revision of the GFE on this information, unless it changed or is later found to be inaccurate.

10.  If a loan originator issues a GFE without identifying a property address, the subsequent identification of the property address is not considered a changed circumstance.

11.  Wrong property address, parties taken off or added on to title or property moved into or out of trust can be a changed circumstance for issuing a new GFE.

12.  Loan not closing on a purchase money contract due to borrower or seller activities may or may not be a changed circumstance to change GFE as long as loan originator did not know of this prior to GFE being originally issued.

13.  In new home construction purchases, where settlement is anticipated to occur more than 60 calendar days from the time a GFE is provided, the loan originator may provide the GFE to the borrower with a clear and conspicuous disclosure stating that at any time up until 60 calendar days prior to closing, the loan originator may issue a revised GFE. No disclosure means cannot change original GFE.

14.  The loan originator issuing the GFE must be the name at the top of Page 1.

15.  There are no restrictions on the amount of time the interest rate must remain available. The interest rate can be available for any period of time that the loan originator chooses, including for example, a period of time within one day or for several days.

16.  The estimate for--all other settlement charges in the --Important dates section of the GFE must be available for at least 10 business days.

17.  If the lender does not offer rate locks lines 1, 3 and 4 of important dates should indicate Not Available or NA.

18.  There may not be a credit for a yield spread premium and a charge for discount points in the same transaction. Only one box in GFE Block 2, "Your credit or charge for the specific interest rate chosen," may be checked. In other words, there cannot be a YSP if the loan has truly been discounted.

19.  Origination charges (line 801) include all charges for all services by the loan originator including the brokers, administrative, processing and attorney prepared documents.

20.  Payments from lender to broker are shown as borrower credit on line 803 of HUD-1. The payment man not be shown as POC.

MORAL

This is but a very small part of the changes and they are still in a state of flux. However, these are put here so you can update your Quality Control Plan and HUD audit manual which will definitely be out of date on Jan. 1, 2010.

FEDERAL TRADE COMMISSION CHASES TWO MORE COMPANIES DOING LOAN MODIFICATIONS

FACTS

The Federal Trade Commission it has taken action against two companies for allegedly making false promises about helping people avoid foreclosure. The FTC in August 2009 filed charges against Irvine, Calif.-based Infinity Group Services and its president, Kahram Zamani, with falsely claiming they would obtain a loan modification in all, or nearly all, cases and give refunds if they failed to get help. Infinity Group Services has since filed a Chapter 7 Bankruptcy.

Instead, the FTC alleges the company often failed to get a deal and either ignored refund requests or returned money only after consumers complained to the FTC or another agency.

In a separate case in April, 2009 the FTC filed a complaint against Irvine-based Federal Loan Modification Law Center for similar reasons. Since then the managing attorney for the Federal Loan Modification Law Center, John Anz has tendered his resignation to the State Bar of California with charges pending and his law license is currently inactive.

Additionally, Christian M. Dillon tendered his resignation to the State Bar of California with charges pending and his license is currently inactive over failure to perform loan modification services for client.

The FTC also alleges Infinity advertised a flat fee of $995 for a mortgage refinance but later sought additional fees ranging from $2,000 to $15,000.

The FTC filed similar civil charges against Nations Housing Modification Center in San Marcos, Calif. (ocreg91809, for infinity case see 8:09-cv-00977; ladlyjl81309p.4)

MORAL

You will note the State Bar of California is chasing attorneys doing loan modifications when they fail to perform. So if you think you are exempt because you as a mortgage broker are using an attorney to assist your clients I suggest you examine the method you are using very carefully.

FTC CIVIL LAWSUIT AGAINST NATIONAL HOUSING MODIFICATION CENTER, MICHAEL TRAP, GLENN ROSOFSKY AND BRYAN ROSENBERG

FACTS

Three California men are allegedly scamming distressed homeowners by using an official-sounding name and a Pennsylvania Avenue address to charge thousands of dollars for foreclosure "services" they do not provide, the FTC says in a Federal Court. The Federal Housing Modification Department is not a government program, but a scam run by three men in San Marcos, Calif., the FTC says.

The scam also uses the names Nations Housing Modification Center and Loan Modification Reform Association, the FTC says. Defendants Michael Trap, Glenn Rosofsky and Bryan Rosenberg run the game out of San Marcos, a wealthy northern suburb of San Diego, according to the complaint.
The men use company Web sites, telemarketing and direct mail solicitations through a mailing address on Pennsylvania Ave. in Washington, down the street from the White House.
Their pitch letter, which they call a "Final Entitlement Notice," claims that "Your modification case has been assigned to the following processing center: Nations Housing Modification Center," and claims that Congress passed a bill that "allows the Nations Housing Modification Center to provide relief for homeowners that are delinquent on their mortgage through the National Home Affordable Modification Program."

They also advertise bogus debt relief services through a Web site that lists a toll-free number, the complaint states. Telemarketers field calls and claim they have "a team of attorneys and forensic accountants working around the clock," though the company has neither on staff, the FTC says.
The defendants tell consumers they get 200 calls they get a day but only 25% qualify for their program, which is nonsense, the FTC says, as "all or virtually all consumers who initially contact defendants are declared pre-qualified."

The telemarketers extract financial information over the phone and charge $2,500 for a one-time payment, or two payments of $1,500, the FTC says. As is typical in such scams, when they get the money they tell the consumer to stop communicating with the lender, as it may interfere with their "attorney negotiations," according to the complaint.

They claim, falsely, that more than 90% of their clients get the promised mortgage modifications, which is not only untrue in itself, but simply making the claims violates a telemarketing rule, the FTC says.
The FTC says the company is in no way affiliated with the government, despite what its name suggests. The FTC seeks an injunction, disgorgement of ill-gotten gains, refunds, and rescission of the bogus contracts (crthsenws91809, see Wash.D.C. Case 1:09-cv-01753-RJL)

MODESTO CRIMINAL TRIAL CONTINUES CONCERNING HARD MONEY LOANS BROKERED BY ROBERT CECCARELLI

FACTS

Robert Ceccarelli was on the witness stand on Sept. 15, 2009 to fight off grand theft and fraud allegations. He said his investors knew their money was being used in high-risk loans that came with lavish returns. The trial continued as he spent all day on the stand. His defense attorney, Frank Carson, presented Ceccarelli's side to the jury, reminding it that his client warned investors that they weren't guaranteed to make money.

Ceccarelli faces 21 charges -- one was dropped for lack of evidence -- stemming from an investment business he ran during the housing market's boom. He could face more than 20 years in prison if convicted on all counts.

The hard-money loan business' collapse left several investors out $1.2 million, according to the Merced County District Attorney's Office.

One developer went to Ceccarelli promising $6 million on a $100,000 investment. In turn, Ceccarelli told his investors they could get exuberant returns if the loans succeeded. One woman from Sparks, Nev., took out a second mortgage and gave him $300,000, anticipating a $400,000 return.

Ceccarelli, besides offering home mortgage loans under Heritage Funding Group, dealt in hard-money loans. Those kinds of loans are typically for 30 to 60 days and come with high interest rates, ranging from 10 to 30%. They're also risky for the lender because they're not backed by any assets. Through personal and business contacts, Ceccarelli is alleged to have developed a network of investors looking to make handsome returns on their money. They included local business people and Golden Valley High School teachers.

Prosecutor Walter Wall maintains that the money was used to furnish Ceccarelli's posh lifestyle, which included fancy cars and gambling trips. Carson, the defense attorney, disputes this, pointing out there's little evidence to support the theory.

The woman in Sparks, desperate to get her money back, went to Ceccarelli's boss at the mortgage company. Unsuccessful, she continued to pressure Ceccarelli. He told the jury he transferred some money to her because he considered her a friend. "I was feeling bad and took responsibility on myself," he said, adding later, "It hurt me." He continued to speak with her until his October 2006 arrest.

Another time, Ceccarelli took $200,000 from a local insurance man who expected a return of $400,000. He had his niece, an attorney, offer her thoughts on the deal. Ceccarelli testified that she warned against loaning the money because of the risk. The man went ahead anyway because he wanted to purchase a $1 million home in Merced County.

Ceccarelli, trying to come up with cash, gave the man several checks that he warned wouldn't clear. They were meant to be placeholders until he had enough money to pay the man back. The man went to Ceccarelli's office and grew angry. Ceccarelli offered the keys to his car. He explained that he was having a hard time getting to his money because of child support liens on his banking accounts. He showed the victim letters by local attorneys -- they allegedly turned out be forged -- supporting his story. Ceccarelli told the jury he hadn't meant to defraud the man with the faked letters. (merced sun-star 9/16/09)

MORAL

The saga goes on. The moral here more than anything else is do not invest in hard money loans, stocks or anything else unless you know what you are doing. The one person was warned by his own niece not to do it and did not follow his own attorney's advice. Maybe because she was his niece.

VENTURA COUNT PASTOR ARRESTED FOR STEALING HOME FROM ELDERLY PARISHIONER

FACTS

Alonzo Gene McCowan, commonly known as the Rev. Lonnie McCowan, the pastor of the Solid Rock Chris tian Center in Ventura, Calif., and his wife were arrested on Sept. 17, 2009. He was charged with two counts of theft from an elderly person for allegedly duping an elderly man into signing over the deed to his home and for two counts of money laundering in an amount that surpassed $500,000, according to a felony complaint.

His wife, Kimberly Ann Oglesby McCowan, is charged with one count of grand theft and one count of money laundering in the same complaint. Senior Deputy District Attorney Miles Weiss is quoted as stating the McCowans, who live in Camarillo, were booked with bail set at $500,000 for McCowan and $40,000 for his wife.

Alonzo Gene McCowan is accused of taking advantage of Leo Gilmond by getting him to sign over the deed to his Ventura house in October 2004. In exchange, the pastor promised to pay Gilmond $460,000. McCowan told Gilmond "he wanted to buy the home so he could use it as a rental for church dignitaries and students," according to an affidavit filed by Frank Huber, investigating officer for the Ventura County District Attorney's Office.

McCowan told Gilmond he needed a signed grant deed that "would be held in the church office solely for the purpose of verifying the purchase of the property to church leaders and to demonstrate his authority to rent the property," the affidavit states. It adds that Gilmond "knew signing a grant deed was risky but he trusted (A. McCowan) because he represented himself as a religious man; it was these religious representations that made Gilmond more trusting of (A. McCowan)."

The McCowans made installment payments totaling $10,000 according to the agreement, said investigators. A balloon payment of $450,000 was due in January 2008. When Gilmond tried to collect it, he found his home was in foreclosure, according to court records. According to the investigator, "Gilmond was in disbelief. (A. McCowan) admitted to Gilmond that he had taken out a $420,000 loan on the property and had lost the money in the stock market."

Gilmond went to his son, Gary Gilmond, and attorney Greg Jones to find out how McCowan was able to take out the $420,000 loan, according to the affidavit. They learned the McCowans had withdrawn $420,000 in equity by refinancing the property in Kimberly McCowan's name.

Huber, the DA investigator, stated he stumbled upon evidence this summer that indicated McCowan purchased a $480,000 property on Sonora Drive in Camarillo "about five to six months after the $420,000 was allegedly stolen" from Gilmond. The evidence was seized in Palm Desert, while Huber was investigating a Ponzi scheme operated by Terry Tucker and Cheri Tucker, both of whom are awaiting sentencing in federal court on Sept. 28.

The Tuckers, the former proprietors of Tucker Realty and Tucker Mortgage, pleaded guilty in March to two counts of bank fraud. They had homes in Thousand Oaks, San Diego and Lake Arrowhead, as well as property in the Palm Springs.

McCowan "told me some of the money for the ($143,000) down payment on the Sonora property was borrowed from the Tuckers," Huber states in the affidavit. Investigators allege the Sonora Drive property -- which has been foreclosed on -- was purchased by McCowan with a $336,000 loan from Downey Savings and Loan Association, and the mortgage broker was Terry Tucker.

The Tuckers' files held loan applications in the name of "Jene Lonny McCowan," an alias used by McCowan, according to Huber. The mortgage loan application prepared by Terry Tucker showed McCowan's employment as director of Solid Rock Christian Center, "where he purportedly earned $35,200 a month."

Court records show McCowan told Huber "this was not true and his church income was less than $5,000 a month," and that the $35,200 a month was money he earned from investments and speaking events. McCowan advertises "multiple streams of income seminar programs" on his Web site "LonnieMcCowan.com."

"He has learned how to create multiple streams of income," according to the Web site. "Mr. McCowan says, 'It is an absolute phenomenon!' and he wants to teach others how to do the same thing."

If convicted, McCowan faces a maximum of 15 years, four months in prison, with $1.74 million in fines plus restitution. His wife faces a maximum of six years and four months in prison, with $250,000 in fines plus actual restitution. (ventctystr91809)

MORAL

If you cannot trust the pastor how can you possibly trust anyone else? That investigator was sure busy. Investigates one crime on the Tuckers and comes across the other.

CALIFORNIA MAN PLEADS GUILTY TO FRAUD IN VERMONT

FACTS

Benjamin Osmanson of California and Sarita, Texas, pleaded guilty to three counts of conspiracy, wire fraud, and money laundering related to his scheme to defraud mortgage lenders by submitting false loan applications in the names of "investors." Osmanson was arrested in October 2008 in Texas. His codefendant Jillian Protzman pled guilty to two counts of conspiracy and money laundering. Two mortgage brokers involved in the scheme, Mike Otis and Chris Whitfield pled guilty earlier this year in the Western District of Kentucky at Louisville, Ky. Additionally, Florida Realtor Margaret Giresi pled guilty in Vermont to an information charging her with conspiracy for her role in the scheme.

Osmanson was charged in an eleven-count indictment alleging that from at least as early as January 2006 through at least April 2007, he and Protzman orchestrated the purchase of at least 50 properties in California, Florida, Kentucky, and Vermont in the names of at least 10 investors, obtaining more than $26 million in loans to support the purchases. Osmanson recruited friends, family members, and acquaintances to "invest" in real estate. Osmanson and Protzman then submitted fraudulent loan applications in the names of the investors to obtain fully financed mortgage loans. The indictment states that Osmanson, Protzman, and others sought loans from multiple lenders, and closed the loans for each investor within a short period of time, in order to preserve the appearance of the investor's good credit until the transactions were complete. The indictment further alleges that Osmanson and Protzman continued to recruit investors and submit applications for new loans even after the loans to the initial investors began to fail. During the plea hearing, Osmanson admitted his scheme caused over $11 million in losses to the mortgage lenders as the properties purchased during the scheme went into foreclosure.

Sentencing is preliminarily scheduled for January 2010. Osmanson faces maximum possible terms of imprisonment of up to five years on the conspiracy count, 30 years on the wire fraud count, and 10 years on the money laundering count. (usattyvt91509)

MORAL

You have to admit he is no piker! Over $26 million in loans and over $11 million in losses. I would say he is looking to spend over five years at a federal hotel and restitution orders of $11 million. Remember two things: 1-There is no parole in the federal system; 2-Restitution is not dischargeable in bankruptcy.

MARYLAND MAN SENTENCED TO 6.5 YEARS IN FEDERAL PRISON BECAUSE OF FORECLOSURE RESCUE SCAM

FACTS

U.S. District Judge Deborah K. Chasanow sentenced Michael K. Lewis, of Takoma Park, Md., 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. 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. (amchron91909gog)

MORAL

Call it foreclosure rescue, loan modification, credit correction, TIL Forensic Audit, whatever. If you are involved in these currently, then there is a good chance the Attorney General in your state and/or the licensing agencies are looking into it. These are now very "hot" buttons for law enforcement and garner a lot of good press for law enforcement. Unfortunately, the "good guys" must suffer with the bad since from law enforcement point of view in this attorneys/ opinion, all are suspect.

NORTH CAROLINA LOAN OFFICER PLEADS GUILTY TO

MORTGAGE FRAUD

FACTS

Joseph A. Woods, a loan officer for a Charlotte mortgage company has agreed to plead guilty in a mortgage fraud operation. He is the eighth person identified so far by federal prosecutors in the scheme, "functioned as a promoter in the conspiracy," according to the criminal filing. Woods was a "loan officer and promoter for Mortgage Fraud Cell No. 2." He also "controlled" a credit counseling company known both as Rights and Assoc. and Wrights and Assoc. Prosecutors have identified five mortgage fraud cells, operating in 2006 and 2007 in Mecklenburg and Union counties.

On July 13, 2007, Woods and other cell members made "false and fraudulent statements" to get a $1.36 million home mortgage loan from First Tennessee Bank. Woods also filed a 2007 federal income tax return saying he had income of less than $12,000. The filing by the U.S. Attorney's office says he knew his income "was substantially in excess" of the reported amount.

Woods is charged with one count each of mortgage fraud conspiracy, bank fraud and making a false statement on a tax return. He faces fines that could total as much as $750,000 and up to 38 years in prison. He also agreed to surrender his loan officer's license and not apply for any license related to the real estate industry until the completion of his sentence.

Participants in the fraud agreed to buy homes at one price from builders, arranged buyers at a higher price and lied to get mortgages at the higher level. Prices were generally inflated by $200,000 to $500,000. (Now that is what I call overnight inflation.) At closing, the difference between the two prices would be distributed among cell members.

Participants began agreeing to plead guilty late last year. No one has yet been sentenced. The fraud cells "primarily targeted" the neighborhoods of Providence Downs South, Woodhall, Chatelaine, Skyecroft, Firethorne, Stratford on Providence and Piper Glen, North Carolina. (charobs91909)

MORAL

Notice several things. One is complaint filed and pleads guilty immediately. This means cooperation. The second is the identity of the mortgage companies are called "Mortgage Cell" meaning in this attorney's opinion it is an ongoing investigation. Three is I trust everyone has good attorneys because they will need them.

OREGON BROKER ACCUSED OF ID THEFT

FACTS

Julian Ruiz, a mortgage broker, was arrested by Salem police and accused of stealing personal information to buy houses. Lt. Steve Birr is quoted as saying Ruiz of Keizer financed a $376,000 home in 2006 by using stolen personal information from a customer. The house went into foreclosure in 2008. Birr is quoted as also saying Ruiz stole another customer's information to buy a $417,000 house in 2008, and that place also went into foreclosure. Ruiz has been lodged at the Marion County jail on charges of mortgage fraud, identity theft, theft by deception, forgery and issuing a false financial statement. (kvtz.comap91809)

MORAL

He is innocent until proven guilty by a court of law beyond a reasonable doubt. But, what it does mean is watch the loan officers you employ because ultimately you get stuck with the civil lawsuit and/or the discipline on your license for his acts as your agent.

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.