HUD MORTGAGEE REVIEW BOARD DISCIPLINES FHA MORTGAGEES
FACTS
On Nov.5, 2009, the U.S. Department of Housing and Urban Development announced that its Mortgagee Review Board is imposing civil money penalties totaling $27,000 on two FHA-approved lenders in Wisconsin and Connecticut. The MRB also reached tentative settlements with four other lenders and issued two Letters of Reprimand to lenders that HUD alleged violated FHA requirements.
HUD's MRB is imposing civil money penalties against the following lenders:
* 1st Rate Mortgage Corp. (Green Bay, Wis.): 1st Rate is a non-supervised loan correspondent. HUD alleged that 1st Rate violated HUD/FHA's third party origination restrictions, made false certifications concerning the compliance with these restrictions and failed to maintain a quality control plan in accordance with HUD/FHA requirements. MRB voted to impose civil money penalties in the amount of $20,000.
* Access Mortgage Corporation (New Haven, Conn.): Access Mortgage Corp. is a non-supervised direct endorsement mortgagee. HUD alleged that Access violated HUD/FHA requirements by improperly using the official FHA logo and failing to notify HUD of a change in its "d/b/a" name. MRB voted to impose civil money penalties in the amount of $7,000.
Each lender can challenge the imposition of civil money penalties and seek a hearing before an administrative law judge.
MRB has reached tentative settlements with the following lenders:
* Nations Direct Mortgage LLC (Irvine, Calif.) - Nations Direct is a non-supervised direct endorsement mortgagee. HUD alleged that Nations Direct used the official HUD seal in a contract posted to its website. MRB voted to impose a civil money penalty in the amount of $3,500, which Nations Direct has now offered to pay.
* VanDyk Mortgage Corp. (Grand Rapids, Mich.) - VanDyk Mortgage Corp. is a non-supervised direct endorsement mortgagee. HUD alleged that VanDyk violated HUD/FHA requirements by failing to properly document a borrower's income and failing to ensure that an employee did not participate in the origination of her own insured mortgage. VanDyk agreed to pay a civil money penalty of $7,500 and indemnify HUD against losses in the two loans at issue.
* US Bank NA (Minneapolis) - US Bank is a supervised federal savings bank and is a GNMA issuer. US Bank has agreed to settle allegations that it violated HUD/FHA requirements in the submission of documentation necessary for the department to process a claim on a multifamily insured property. HUD had alleged that US Bank's failure to provide necessary documentation delayed the re-sale of the foreclosed property and the department's mitigation of the FHA fund's losses in connection with the claim. US Bank agreed to make an administrative payment of $37,500 to resolve this matter.
* Sun West Mortgage Co. Inc. (Cerritos, Calif.) - Sun West is a non-supervised direct endorsement mortgagee. HUD alleged that Sun West originated 10 Home Equity Conversion Mortgage loans in Massachusetts before receiving the necessary license and approval to originate HECM loans in that state and that Sun West failed to notify HUD that Massachusetts had issued a cease and desist order prohibiting it from the unlicensed origination of loans in that jurisdiction. Sun West agreed to pay a civil money penalty of $10,000 and accept a letter of reprimand to resolve the matter.
The MRB also issued a letter of reprimand issued to Community Lender Inc. of Boise, Idaho. HUD alleged Community Lender failed to notify HUD that it had lost its license in the State of Idaho. A letter of reprimand was deemed appropriate because the revocation of Community's license occurred as a result of the lapsing of its surety bond for a period of two weeks and the lender provided evidence that the problem was immediately corrected. (HUD No. 09-212, 11-5-09)
MORAL
We have had and still have the HUD acceptable quality control plan that can be purchased and used by your office. Or would you too rather pay HUD?
YOU AS A LENDER OR MORTGAGE BROKER ARE RESPONSIBLE TO HUD/FHA FOR THE QUALITY OF THE APPRAISAL
FACTS
"Lender Responsibilities: Mortgagees are reminded that they are responsible along with the appraiser for the quality and accuracy of the appraisal if the lender knew or should have known that there were problems with the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes." (ml09-41)
MORAL
In plain English, if the appraisal is bad, you the mortgage lender will indemnify HUD against any loss. Has your underwriter done the appraisal review on your loans? Is your QCP up to date?
SAN FRANCISCO MORTGAGE BROKER PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Michael Chou pleaded guilty in federal court on Oct. 30, 2009 to wire fraud conspiracy. In pleading guilty, Chou admitted that, in a scheme that began in 2003 and continued until approximately April 30, 2009, he defrauded mortgage lenders and financial institutions by providing false and fraudulent information in support of mortgage loan applications. Working out of an office in San Francisco, Chou and his colleagues assisted individuals who wanted to obtain mortgages from mortgage lenders so they could purchase residential properties in the Northern District of California and elsewhere. As a part of this scheme, Chou routinely transmitted fraudulent loan applications to mortgage lenders. Those loan applications contained false employment information and false and inflated income and bank account information. The loan applications were supported by false and forged documents that purported to verify the borrowers' employment, income and assets. Chou, and other members of the scheme, used a network of co-conspirators who agreed to pose as the borrowers' employers and falsely verify to the mortgage lenders the accuracy of the employment and income information listed on the loan applications. As a result of Chou's participation in this conspiracy he illegally earned $360,800.
Chou, who is currently not in custody, is scheduled to be sentenced on March 19, 2010, before U.S. District Court Judge Susan Illston in San Francisco. The maximum statutory penalty for wire fraud conspiracy in violation of Title 18, United States Code, Section 1349 is 30 years and a fine of $1 million.
Pursuant to the plea agreement, Chou has agreed to forfeit $360,800 to the United States.
Eleven other individuals have been charged in connection with the case. (Case #: 09-770 (SI),usattyndca103009)
MORAL
I trust the other 11 have good attorneys because my best estimate is that Mr. Chou is cooperating in testifying against the other 11.
MASTERMIND OF COLORADO MORTGAGE FRAUD RING GETS A PRIZE: 30 YEARS IN A FEDERAL PRISON
FACTS
Uto Essien, a Nigerian national has been sentenced to 30 years in prison for his role as the ringleader in a multimillion-dollar mortgage fraud scheme. He will be deported once he gets out of prison.
Following a seven-day trial in Adams County, Essien was convicted of four felony counts -- two counts of forgery, and one count each of theft by receiving and violating the Colorado Organized Crime Control Act.
Essien and nine others were indicted in March 2008 on charges connected with 34 real estate deals in Denver, Adams, Arapahoe and Jefferson counties. The arrest of the 10 capped a two-year investigation.
Between spring 2004 and spring 2007, Essien and his co-defendants allegedly used false invoices and shell corporations to obtain $10.9 million in mortgages, keeping $1.1 million of those funds, according to the indictment. Essien's shell companies were Essien and Co. Realty Ltd. and EU Enterprise. Those indicted allegedly used shell buyers to acquire houses at inflated prices, telling mortgage lenders that the houses had gotten improvements they actually hadn't. Lenders were deceived into paying for the improvements, the indictment alleged.
Loans also often were obtained by overstating buyers' income and understating debts, the indictment alleged. With many of the properties, mortgage payments never were made, and the homes quickly were foreclosed on, according to the indictment. Essien acted as the real estate broker in the deals, the indictment alleged. Prosecutors said he was directly involved in purchasing four properties with total mortgages of nearly $1.4 million and kept $140,000 from those deals, according to the indictment.
Here is the disposition of other cases in the investigation:
Scott Hinkley pleaded guilty on Dec. 12, 2008, to violating the Colorado Organized Crime Control Act, a class-two felony, and forgery, a class-five felony. He was sentenced Feb. 12 to 10 years in community corrections.
Bradly Decker pleaded guilty on July 24 to theft by receiving, a class-three felony.
Idara Ekiko pleaded guilty on Aug. 5 to computer crime, a class-three felony.
Cheri Decker pleaded guilty Aug. 26 to violating the Colorado Organized Crime Control Act, a class-two felony; theft, a class-three felony; and forgery, a class-five felony.
Jennifer Wosley pleaded guilty on June 16, 2008, to computer crime, a class-three felony. She was sentenced on Aug. 4, 2008, to eight years probation, to 200 hours community service, and drug and alcohol evaluation and treatment.
Jessica Caplan was convicted of forgery, a class-five felony, during a jury trial.
Heather Etuk pleaded guilty on Aug. 4, 2008, to forgery, a class-five felony. She was sentenced Sept. 29, 2008, to five years probation, $30,900 restitution, a 90-day suspended jail sentence and 100 hours of community service.
Jessica Decker pleaded guilty on Oct. 7, 2008, to obtaining a financial device with a false statement, a class-one misdemeanor. She was sentenced Oct. 7, 2008, to two years probation and $88,000 restitution.
Enoh Etuk pleaded guilty on July 24 to theft, a class-one misdemeanor. She was sentenced on July 24 to two years probation, and ordered to pay $133,781 restitution. (dnvrbusjl91109)
MORAL
Anyone in the Denver area have any friends in the above? Any business relationships? You might want to talk to your attorney about it.
FLORIDA FBI NETS OVER 100 DEFENDANTS WHO ARE CHARGED WITH MORTGAGE FRAUD
FACTS
A nine-month-long mortgage fraud surge investigation has resulted in charges against more than 100 defendants and involves allegations concerning more than $400 million in loans procured by fraud and more than 700 properties.
There are currently mortgage fraud-related charges pending against approximately 500 defendants in federal mortgage fraud cases around the nation. The cases concern both mortgage schemes designed to defraud mortgage lenders and "foreclosure rescue schemes" which prey on distressed homeowners.
The U.S. Attorney's Office charged mortgage fraud defendants throughout the Middle District of Florida. The number of defendants charged by office breaks down as follows: Ft. Myers, 32; Tampa, 30; Orlando, 19; and Jacksonville, 24. Of these defendants, seven are related to cases under seal and not in the public record at this juncture. (usattymdfl11409)
MORAL
As you can see, it is really intense. I have explained consistently, if anyone has been overly creative with their loans in the last 10 years, they should consult with their attorney now before the U.S. Attorney consults with them later.
FLORIDA MAN GETS SEVEN YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD PLUS A JUDGMENT AGAINST HIM FOR $6,296,303.65
FACTS
Juan Carlos Gonzalez (of Jacksonville) was sentenced to seven years in federal prison for conspiring to commit wire and bank fraud. The court also entered a money judgment against Gonzalez for $6,296,303.65, the amount that Gonzalez obtained from the fraud.
During 2004 and 2005, Gonzalez contracted to purchase 55 properties. For each property, Gonzalez directed an appraiser to significantly inflate the property's value and submitted the inflated price to a lender to support a mortgage loan based on that price. Gonzalez also submitted fraudulent financial documents and information, including altered bank statements and payroll records, to cause the lender to approve a loan for a higher amount. At each closing, Gonzalez received the difference between the loan amount, which was based on the inflated appraisal, and the actual purchase price.
Gonzalez's plea agreement details one transaction in which Gonzalez contracted to purchase a house for $490,000, obtained an inflated appraisal for $625,000, and submitted first and second mortgage loan applications reflecting a sales price of $625,000. Gonzalez also submitted altered bank account statements showing significantly larger cash balances than actually existed. The lender approved the loans, and, at the closing Gonzalez received $134,000, listed on closing documents as an "Assignment of Contract Fee."
Gonzalez's fraudulent acts resulted in lenders extending more than $29,272,000 in first and second mortgage loans. Gonzalez, who had no other source of significant income, received $6,296,303.65 from his scheme. (usattymdfl11509)
MORAL
Creative little bugger, wasn't he? Over $29 million in loans with over $6 million to himself (about 20%). Now he does seven years in federal prison ON A PLEA AGREEMENT. As I said, see your attorney now before the U.S. Attorney sees you later.
NEVADA DIVISION OF MORTGAGE LENDING TOUGHENS STANCE ON MORTGAGE AGENTS THAT LET THEIR LICENSES EXPIRE AND STILL DO MORTGAGE LOANS
FACTS
The Division of Mortgage Lending as a mortgage agent from approximately March 31, 2005, licensed Derek Parent until April 1, 2008, when his mortgage agent license was cancelled for failure to renew. On approximately March 16, 2009, Parent submitted an application for a mortgage agent license to the Division. His status then was "license application pending."
On March 9, 2009, the Division conducted a regularly scheduled examination of South Wind Financial, Inc. and determined that Parent had engaged in mortgage lending activity in Nevada, without having been issued either a mortgage broker or mortgage agent license.
The Division has extended an officer of settlement to resolve the matter without a formal hearing as follows: Parent is to provide a letter to the Division detailing the efforts made to settle outstanding tax liens. Parent is not to act in any supervisory capacity or as a qualified employee for two years from the date of execution of the agreement by the Division if Parent decides to accept the terms of the agreement.
Further, the mortgage broker which Parent intends to be associated with or employed by must sign this agreement wherein he/she agrees to do a quality control review of all loans that Parent originates for one year from the date of execution of the agreement by the Division; and Parent is to pay a fine in the amount of $5,000, plus costs and fees in the amount of $300 at the time he signs the agreement.
The agreement if signed by Parent, must be countersigned by his mortgage broker at Southwind Financial should Southwind desire to do so. (mld11809)
MORAL
Do not do loans without your license. In this case, if accepted by Parent, he has to pay $5,000, plus $300 plus all his loans have to be quality controlled by his broker plus he cannot be a qualified employee or a supervisor for two years. I would suggest get your license first and do loans later.
A REMINDER TO NEVADA MORTGAGE BROKERS AND MORTGAGE BANKERS ABOUT RESTRICTIONS ON COLLECTING ADVANCE FEES
FACTS
All advance fees, including application fees, collected by a licensee must be placed in escrow. These fees can only be released to the licensee upon completion of the loan commitment or the loan. In the event no loan commitment is obtained or the loan does not close, the advance fees must be returned to the person who paid them.
The only exception to this is that fees paid to third persons, such as credit report fees paid to a reporting agency, need not be refunded if the person who paid them first signs an advance fee agreement. There is no required form of advance fee agreement, but the law does impose certain requirements.
Mortgage Brokers and Mortgage Agents
NRS 645B.165
1. Except as otherwise provided in subsection 3, the amount of any advance fee, salary, deposit or money paid to a mortgage broker and his mortgage agents or any other person to obtain a loan which will be secured by a lien on real property must be placed in escrow pending completion of the loan or a commitment for the loan.
2. The amount held in escrow pursuant to subsection 1 must be released:
a. Upon completion of the loan or commitment for the loan, to the mortgage broker or other person to whom the advance fee, salary, deposit or money was paid.
b. If the loan or commitment for the loan fails, to the person who made the payment.
3. Advance payments to cover reasonably estimated costs paid to third persons are excluded from the provisions of subsections 1 and 2 if the person making them first signs a written agreement which specifies the estimated costs by item and the estimated aggregate cost, and which recites that money advanced for costs will not be refunded. If an itemized service is not performed and the estimated cost thereof is not refunded, the recipient of the advance payment is subject to the penalties.
The provisions above are identical for Mortgage Bankers under NRS645E.
MORAL
Pay attention or lose your license or pay a penalty or both. Remember under the new S.A.F.E. Act it can actually cost you your license nationwide, let alone in Nevada. The Advance Fee Agreement is easily drawn. If you cannot or do no desire to do it yourself, you may contact us and we will do one for you. The fee is $500 to answer that question in advance.
TEXAS WOMAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Nov. 4, Tahmeane Elrod, a Tyler, Texas woman, pleaded guilty to mortgage-related fraud in the Eastern District of Texas. Elrod devised a scheme to defraud mortgage financing companies by submitting false documents in order to qualify for mortgages for the purchase of a residential property. Elrod falsely inflated levels of earned income and forged signatures on a Request for Verification of Employment form as part of a loan application package. Elrod faces up to five years in federal prison at sentencing. (usattyedtx11409)
MORAL
As I have been saying to be redundant, the federal government is very, very serious about pursuing mortgage fraud. See your attorney now or see a federal agent later.
WASHINGTON STATE BROKERS THAT WANT TO RENEW THEIR LICENSES FOR 2010 READ BELOW
FACTS
Beginning January 2010, the Designated Broker license type will be discontinued and replaced by a new Designated Broker Registration. All current DB licenses in the NMLS are flagged to prevent renewal.
The DB must resubmit his/her MU4 under the new DB Registration and be sponsored in the NMLS. In addition, the new DB Registration does NOT permit the DB to originate loans. If the DB wishes to originate, he/she must also submit their MU4 under the Loan Originator License type (this is in addition to submitting the MU4 under the DB Registration).
FAQ's to help you renew
* I'm a current Designated Broker who wants to continue to be a Designated Broker in 2010.
Before the end of the year (preferably while renewing your Mortgage Broker license), you will need to resubmit your MU4 under the new Designated Broker Registration and have the company for which you are Designated Broker submit a sponsorship request for that new registration. NOTE: Just completing this step does NOT authorize the DB to originate loans. See question below.
* I'm a current Designated Broker who wants to both continue as a Designated Broker and originate loans. What do I need to do?
Before the end of the year (preferably while renewing your Mortgage Broker license), you will need to resubmit your MU4 under both the new Designated Broker Registration and the Loan Originator license and have the company for which you are Designated Broker submit a sponsorship request for both the DB Registration and loan originator license.
* Once I apply for the Designated Broker Registration do I need to send anything to DFI?
No. Once you submit your MU4 under the Designated Broker Registration and are sponsored by your company, DFI does not need anything further from you to complete that application. As part of the company's Mortgage Broker renewal, however, you will have to provide DFI with your continuing education.
* Once I apply for both the Designated Broker Registration and the Loan Originator license do I need to send anything to DFI?
No. Once you submit your MU4 under the Designated Broker Registration and Loan Originator license and both are sponsored by your company, DFI does not need anything further from you to complete those applications. As part of the company's Mortgage Broker renewal, however, you will have to provide DFI with your continuing education.
* After I apply for the Designated Broker Registration, do I need to surrender my Designated Broker license in the NMLS?
No. Please do not surrender your Designated Broker license in the NMLS as it needs to be in effect until the end of 2009 to keep the company properly licensed. The DB license will expire at the end of the year.
Please do not reply to this message. This message is being sent from an unmonitored e-mail address. Messages sent to this address will not be received. If you need further assistance, please contact the Department
MORAL
Read carefully. Do it now, or be unlicensed to do mortgage loans in Washington the coming new year.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
