HUD/RESPA WILL EXERCISE RESTRAINT IN ENFORCING THE NEW GFE/HUD-1 RULE FOR THE FIRST 120 DAYS BUT IT IS STILL THE LAW
FACTS
On Nov. 13, 2009 the U.S. Department of Housing and Urban Development announced that for the first four months of 2010, the staff of the Mortgagee Review Board will exercise restraint in enforcing new regulatory requirements under the Real Estate Settlement Procedures Act due to take full effect on Jan. 1. The MRB instructed its staff to exercise such restraint in considering an action against FHA-approved lenders who have demonstrated that they are making a good faith effort to comply with RESPA's new requirements.
HUD is also asking other federal and relevant state enforcement agencies to exercise the same 120-day restraint in enforcement for non-FHA originators and other settlement service providers who demonstrate the good faith effort to implement RESPA's new rules.
In determining whether a mortgagee has made a good faith effort, MRB staff will consider whether the mortgagee has relied on the new RESPA rule and other written guidance issued by the Department, and the extent to which the mortgagee has made sufficient investment and commitment in technology, training, and quality control designed to comply with the new rule.
On January 1, 2010, HUD will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs. Closing agents will also be required to provide borrowers a new HUD-1 Settlement Statement that clearly compares consumers' final and estimated costs. The new RESPA rule became effective on Jan. 16, 2009, but provided a one-year transition period for the mortgage industry to incorporate these changes. HUD will continue to work with the mortgage industry during this period, including providing a comprehensive set of frequently asked questions on its website. (hud no. 09-215, 11-13-09)
MORAL
Be very, very careful here. HUD is not saying it will not enforce the new GFE and the new HUD-1. It is saying we will take into consideration your mistakes if you are attempting to comply in good faith. In other words you still have to do it or else!
SOME BUT NOT ALL UPDATES ON THE NEW RESPA GFE/HUD-1 AS OF NOV. 19, 2009. READ THE SURPRISES
FACTS
1. RESPA records may be maintained electronically if the person responsible for retaining records under RESPA and HUD's RESPA regulations meets the specific requirements and limitations applicable to the retention of electronic documents set out in the Electronic Signatures in Global and National Commerce Act (ESIGN), that person's responsibility will be satisfied by the retention of electronic records. See sections 101(d) and (e) of ESIGN, 15 U.S.C. § 7001(d) and (e); also see 24 C.F.R. § 3500.23. (However, if the state laws require paper, then paper it is. Otherwise you comply with RESPA but not your state license which can be violated.)
2. The new GFE and HUD-1 may not be altered. The GFE and HUD-1 are prescribed forms. The instructions for the GFE provide that the standardized form is the required form. HUD's regulations provide that language and terms used on the HUD-1 may not be changed, except in limited circumstances which do not include changes to the standardized language (see 24 C.F.R. § 3500.9).
3. All settlement services are not considered origination services. However, all origination services are settlement services.
4. A loan originator may not require the use of its affiliate for tax service or flood certification.
5. A loan originator must issue a GFE 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. (Remember, a loan originator is a mortgage lender or a mortgage broker or a mortgage agent)
6. The only fee that may be collected before the GFE is given to the borrower is the credit report fee and nothing else.
7. The broker may give the GFE, but the lender is responsible for seeing that it is done and that it is done accurately.
8. If the borrower is taking out two loans to purchase the property, each loan must have a separate GFE and a separate HUD-1. However, the principal amount of the second loan and a brief explanation of the second loan should be listed on Lines 204 - 209 of the HUD-1 for the first loan.
9. Processing and administrative services are those services required to perform the functions involved in title service and origination service. Processing and administrative services include, but are not limited to document delivery, document preparation, copying, wiring, preparing endorsements, document handling and notarization.
10. There are no points outside closing on the GFE allowed.
11. Additional pages or addendums may not be added to the GFE. Blocks 3, 6 and 11 however, may have vertical and/or horizontal liens added for necessary additions.
12. Signature lines may not be added to the GFE.
13. All charges typically paid by the borrower must be on the GFE regardless of whether the borrower or the seller pays them.
14. 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 charge; (3) --Daily interest charge; and (4) other interest rate related loan terms. --Our origination charge and all other charges must remain the same from the prior GFE.
15. 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.
16, Where 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 service providers at the time of the GFE, on a separate sheet of paper.
17. The GFE loan terms or charges can change in the event that there are changed circumstances. Changed circumstances is defined in § 3500.2 as: (1) Acts of God, war, disaster, or other emergency; (2) 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; (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (4) 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. In addition, 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.
18. 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.
19. The total of all charges for all loan originators (lenders and mortgage brokers) must be contained in Block 1,--"Our origination charge" on page 2 of the GFE, except for any charge for the specific interest rate chosen. All loan originator charges -- including processing, application, administration fees, underwriting, document preparation, wire, lender inspection, mortgage broker, loan handling, and other miscellaneous fees -- are contained in Block 1, --"Our origination charge."
20. There may not be a credit for a yield spread premium and a charge for discount points in the same transaction.
MORAL
These are not all the changes but they are some of the more important ones that are in the new Good Faith Estimate. The FAQ's put out by HUD make the GFE/HUD-1 so simple to understand that it only takes 51 pages to read it and understand it. I am not kidding. The new simplified GFE/HUD-1 for the borrowers takes 51 pages to explain. But HUD does say it is easier for the borrower to understand. All 51 pages of understanding.
HUD INVESTIGATING DOZENS OF REVERSE MORTGAGES FOR MORTGAGE FRAUD
FACTS
Several dozen of the 1,200 to 1,500 fraud investigations currently underway within the Department of Housing and Urban Development's Inspector General's Office involve home equity conversion mortgages. Some cases involve a single loan; others, hundreds of loans, and they run the gamut of industry practitioners - from single loan officers to big companies, according to Michael Stolworthy, the assistant special agent in charge of mortgage crime investigations in the IG's office, which is the law enforcement arm of HUD. "I'm not saying fraud is widespread, but some of these are not just fly-by-night outfits." said Mr. Stolworthy at a National Reverse Mortgage Lenders Conference. The mortgage cop didn't name names, but he said one miscreant's name has popped up on straw buyer cases involving more than 300 properties. In another investigation that involved the well-known Crips gang of street thugs, 25 seniors were sold highly inflated properties using the popular HECM for purchase program. (bkrun112009)
FORECLOSURES ARE UP AND BANKRUPTCY IN SOME OF THESE CASES MAY BE A NECESSITY DUE TO LENDERS BEING ABLE TO SUE AFTER THE FORECLOSURE SALE
FACTS
A report from the Mortgage Bankers Association found that 14% of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September 2009. It was a record-high figure for the ninth straight quarter.
Among states, the worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43% of new foreclosures. One in four mortgages in Florida were either past due or in foreclosure, the most in the U.S. Nevada was close behind at 23%. About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September 2009 according to the Mortgage Bankers Associations' findings.
Loans backed by the Federal Housing Administration also show rising signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure. [This means the "compare ratio" for lenders will go up putting Direct Endorsement Lenders and Loan Correspondent FHA approval at risk of being withdrawn.] (mercsunstr112009)
MORAL
If you are a Direct Endorsement Lender or a Loan Correspondent with FHA HUD approval you had better keep track of your "Compare Ratio" monthly and if over 150% be prepared for a HUD audit to occur. As to the borrowers, if the loans being foreclosed upon are refinances instead of purchase money, they will probably be pursued for the unsecured note that the second mortgage is left in. We already have lawsuits in that category. In this case they may want to consult someone like our firm's bankruptcy attorney to remove that and other debts at the same time.
SEVEN ARRESTED IN CALIFORNIA FOR MORTGAGE FRAUD
FACTS
Seven people were arrested Thursday, Nov. 19, 2009 and charged with operating a $142 million mortgage and security fraud that pushed 201 Riverside County homes into foreclosure and harmed hundreds of investors in California and Arizona, driving many to financial ruin.
Those arrested were JAMES BENJAMIN DUNCAN, considered the mastermind of the plan, his top associates, HENDRIX MORENO MONTECASTRO and MAURICE MCLEOD all of Murrieta.
Others arrested were Charlie SUNG MUK CHOI, CINDI GAYLE KELLY AND THUAN NHAN DU, all of San Diego, and HELEN MORENO PEDRINO, Montecastro's mother, of Yucaipa.
In a criminal complaint filed Nov. 16, 2009 in Riverside County Superior Court, the seven defendants were accused of 249 counts, each a felony, that included securities fraud, grand theft, elder abuse and corporate identity theft.
The defendants are accused of creating a complex network of shell companies, the chief of which were Pacific Wealth Management (which has no relationship to the company of the same name in San Diego), Stonewood Consulting and Total Return Fund.
According to court documents, investors were recruited into the program with the promise that if they followed the instructions they received, they would become wealthy in three years. They gained comfort knowing that many of the participants were their friends and relatives and the program's leaders insisted they were Christians who wanted the best for them. Frequently, the victims attended the same churches or worked at military bases or were part of the southern Riverside County Filipino community.
The investors were persuaded to refinance their homes to buy multiple investment properties, primarily in southwest Riverside County, with the guarantee that their investment adviser, Pacific Wealth Management, would rent out the properties and provide any additional money needed for the mortgage payments.
Stonewood, the broker for the plan, was able to qualify investors to buy such homes, the complaints said, by falsifying their incomes and assets on loan applications.
In the complaint the Riverside County district attorney filed the defendants were accused of misleading investors by lying or omitting information. Also, the complaint said, the defendants were not licensed to sell investments, and the investments they were touting were not pre-approved by the state Department of Corporations as required in California.
Duncan of Murrieta, was charged with 249 criminal counts, which could draw a sentence of up to 97 years in state prison if convicted, District Attorney Rod Pacheco said.
Duncan was booked Thursday with bail set at $144 million, according to jail records. Montecastro's bail was set at $20.2 million and the others at $17 million each, court documents said.
The arrests, Pacheco said, were the culmination of an undercover investigation that the district attorney undertook in April 2007 in collaboration with the U.S. Attorney, the FBI, the Internal Revenue Service and the U.S. Postal Service.
U.S. Attorney George S. Cardona said his office on Thursday, Nov. 19, 2009 filed criminal charges in U.S. District Court in Los Angeles against three other alleged participants: CHRISTOPHER J. OETTING OF PALM DESERT; LINDA BROOKS OF MURRIETA; AND Steven Kayden of Cathedral City.
Cardona said Oetting had agreed to plead guilty to money laundering, filing false tax returns and playing a key role in various aspects of the case. He said Brooks, who is Duncan's mother-in law, and Kayden had agreed to plead guilty to conspiracy mortgage fraud. Cardona said the three had also agreed to cooperate in the ongoing investigation and to appear as witnesses in trials.
In July of 2007, Hendrix Montecastro, without admitting guilt, forfeited his real estate license and that of Stonewood Consulting after the Department of Real Estate accused them of a litany of violations.
In November 2008, the U.S. Attorney brought criminal charges against Dow Duncan, James Duncan's father, and Joetta Zimmer, Hendrix Montecastro's mother-in law. The complaints alleged that Zimmer and Duncan on separate occasions made false statements on mortgage applications with Washington Mutual Bank to purchase houses in the La Cresta neighborhood of Murrieta. A federal judge ordered the three men to return more than $29 million of illegally gotten gains. Also, the district court imposed a $130,000 penalty on each defendant. McLeod had already agreed to the terms of the order in a separate settlement.
James Benjamin Duncan and Hendrix Moreno Montecastro, two top figures in the Stonewood program, have been charged with securities fraud, grand theft, elder abuse and corporate ID theft. Five others also face charges. JAMES BENJAMIN DUNCAN 249 counts Bail amount: $144 million HENDRIX MORENO MONTECASTRO 249 counts Bail amount: $22.2 million
Charged with securities fraud, grand theft, elder abuse and corporate ID theft MAURICE McLEOD 249 counts Bail amount: $17 million HELEN MORENO PEDRINO 207 counts Bail amount: $17 million Charged with securities fraud, grand theft and corporate ID theft CHARLIE SUNG MUK CHOI 249 counts Bail amount: $17 million Charged with securities fraud and grand theft CINDI GAYLE KELLY 236 counts Bail amount: $17 million THUAN NHAN DU 211 counts Bail amount: $17 million. (prsent112009)
MORAL
Riverside District Attorneys' office is known for many things, but leniency and tolerance is not one of them.
CALIFORNIA MAN PLEADS GUILTY TO MORTGAGE FRAUD ON LENDERS AND FINANCIAL INSTITUTIONS
FACTS
Michael Chou pleaded guilty in federal court today 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, which was intended to inflate the borrowers' creditworthiness. In addition, 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. Chou has agreed to forfeit $360,800 to the United States. Eleven other individuals have been charged in connection with the case. (usattyndca10009, Case #: 09-770)
MORAL
Not in custody. Pleaded guilty. 11 more involved. Any bets on whether he is cooperating. I would say he has a good attorney from this much.
CONNECTICUT APPRAISER INDICTED FOR FALSE APPRAISAL
FACTS
A federal grand jury in Bridgeport, Conn. returned an indictment charging THOMAS PRESTON of Norwalk, Conn. with one count of making a false statement on a mortgage loan application. The indictment was returned on Oct. 7. On Nov. 18, 2009 PRESTON appeared before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport and entered a plea of not guilty to the charge. Following the arraignment, PRESTON was released on a personal recognizance bond.
According to the indictment, PRESTON owned and managed a real estate appraisal company known as Redding Appraisers, and provided appraisals of real and commercial real estate in Connecticut to real estate agents. On approximately Oct. 23, 2006, PRESTON did knowingly and willfully make a false statement or report in a mortgage loan application submitted to IndyMac Bank, a financial institution headquartered in Pasadena, Calif. The false statement related to a real estate appraisal that he made, which he knew would be submitted with the mortgage loan application, on a residential property in Westport, Conn. The appraisal stated that the property had three habitable floors when, in fact, it had only two habitable floors. The alleged false statement allowed PRESTON to justify his appraisal that the property was worth $2.7 million, which corresponded with the stated value in the loan application.
If convicted of the charge, PRESTON faces a maximum term of imprisonment of 30 years and a fine of up to $1 million. (usattyct111809)
MORAL
He is innocent until proven guilty but saying there is three floors when there are only two, is known as "felony stupid."
MARYLAND WOMAN SENTENCED TO OVER 12 YEARS IN FEDERAL PRISON FOR FALSELY TELLING HOME OWNERS HOW TO SAVE THEIR HOMES FROM FORECLOSURE
FACTS
Joy Jackson, of Fort Washington, Md. on Nov. 16, 2009 was sentenced to 151 months in prison followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit. Judge Titus also entered a judgment ordering Jackson to pay restitution of $16,880,884.86 and to forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland and three vehicles.
"Joy Jackson presided over a `money store' that was in the business of ripping off homeowners and mortgage lenders by submitting fraudulent paperwork to support over $37 million of loans that were never intended to be repaid," said U.S. Attorney Rod J. Rosenstein.
According to her plea agreement, Jackson was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, Jackson and co-defendant Jennifer McCall incorporated Metropolitan Money Store, located in Lanham, Md., which offered foreclosure consultation and credit services to financially distressed homeowners. Also at that time, Jackson, Jennifer McCall, Jackson's husband, Kurt Forham, and McCall's husband, Clifford McCall and other coconspirators incorporated Fordham & Fordham Investment Group, Ltd. and Burroughs & Smythe Financial Services, Inc., to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.
From September 2004 to June 2007, Jackson and others conspired to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. (Where have I heard this song before?) The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland.
The conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans on the target properties in the straw buyers' names. At settlements, the conspirators imposed numerous fees and required "seller contributions" which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators' business and personal bank accounts and converted a substantial portion of those funds to their personal use.
To carry out the fraud scheme, Jackson and others obtained large cashier's checks in the names of straw buyers and Metropolitan Money Store employees to conceal transactions from the lenders. Jackson misappropriated the license and bond numbers of other brokerage and credit repair companies and used them to broker loans and fraudulently improve homeowners' credit scores by adding fictitious lines of credit to their credit histories.
During the conspiracy, Jackson provided Wilbur Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, with more than $100,000 in kickback payments. Whenever Jackson requested, Ballesteros permitted Metropolitan Money Store employees to close loans without him or any other closing agent being present. Jackson directed others to prepare fraudulent settlement documents that contained false information. Jackson and Kurt Fordham also paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and F&F accounts to facilitate loans in straw buyer's names.
Jackson directed others to transfer the equity proceeds of homeowners into the general checking accounts of Metropolitan Money Store and F&F, as well as Jackson's personal accounts.
As a result of this scheme, the total loss attributable to Jackson including the estimated losses to the mortgage lenders is $16,880,884.86.
TEN DEFENDANTS, INCLUDING A LAWYER, MORTGAGE BROKER, REAL ESTATE AGENT, LOAN PROCESSOR AND COMPANY OFFICERS HAVE PLEADED GUILTY IN THIS SCHEME. Jackson's husband, Kurt Fordham, of Fort Washington, was sentenced on July 10, 2009 to 10 years in prison for his participation in the scheme. On September 14, 2009, Judge Titus sentenced Richard Allison, of Camp Springs, an attorney and employee of the U.S. Census Bureau who provided legal services to MMS, F&F and Burroughs & Smythe, to 18 months in prison; and Carlisha Dixon of Hyattsville, to five months in prison and five months home detention. On October 5, 2009, Judge Titus sentenced Jennifer McCall's husband, Clifford McCall of Lanham, to four years in prison and his daughter, Chandra Jones, age 31, of Lanham, to 33 months in prison. Katisha Fordham was sentenced to 1 day in prison, followed by five months home detention and five months supervised release. Jennifer McCall, Ronald Chapman and Wilbur Ballesteros are scheduled to be sentenced on Dec. 7, 2009. (usattymd111609)
MORAL
Seems like the person that received one day in prison got the best deal. The rest go to prison for over 12 years, 10 years, the lawyer gets 18 months, loses his license, loses his civil service benefits, loses his retirement. It hardly seems worth it. Especially when there is no parole in the federal prison system. If anyone out there has problems see your attorney new before law enforcement sees you later. The attorney can mitigate much better now than later. If you do not have an attorney give us a call. The consultation for this type of event is free.
MISSOURI MAN GETS OVER 11 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD. HIS PARTNER GETS 9 YEARS.
FACTS
Russell Todd McBride, of Creve Coeur, was sentenced on a mortgage fraud scheme involving the sale of residential real estate located in Sikeston, Mo . After sentencing, the district court remanded McBride to the custody of the United States Marshals to commence serving his sentence.
McBride was sentenced to 135 months on a 34-count indictment for his involvement in the scheme. McBride was an operator of Century Mortgage and Finance, Inc., which was in the business of providing mortgage-related services, and had offices located in Sikeston, Cape Girardeau, St. Louis County, and elsewhere. As a mortgage broker, Century Mortgage would locate and obtain prospective mortgage lenders for prospective borrowers. Employees and others associated with Century Mortgage would prepare mortgage applications and supporting documents for borrowers. Then, for a fee, Century Mortgage would find a mortgage lender to make the loan. Robert Wrolstad worked with McBride and for Century Mortgage, providing services including assisting in closing real estate transactions and working with title companies. Wrolstad was sentenced to nine years in federal prison and taken away in custody then and there.
The scheme, which occurred from at least July 2005 and continued through Nov. 28, 2006, involved investors recruited by McBride and Wrolstad purchasing real estate primarily located in Sikeston, Missouri. The owners of the real estate would sell the properties at or near fair market value to investors recruited by and known to McBride and Wrolstad. The investors paid prices significantly greater than the actual selling price received by the sellers for the properties. The investors would purchase the property at a fraudulent and overvalued price by obtaining loans to purchase the property. As part of the scheme, McBride and Wrolstad obtained appraisals, which significantly overvalued the properties, which enabled them to personally obtain inflated loan proceeds despite having no interest in the conveyed real estate.
McBride represented to investors that the residential real estate properties were good investment properties that the rents would pay the mortgage, that the properties could be acquired with "no money down," and that the properties could be sold, sometimes in approximately a year, at a profit. As part of the scheme, McBride and Wrolstad also paid monies to investors as an inducement for them to purchase residential real estate funded by loans brokered through Century Mortgage. For example, in one case a purchaser paid $66,000 for a property that the seller sold for $7,500. In another real estate transaction, the purchaser paid $54,000 for property that the seller sold for $15,000.
In many cases, purchasers of real estate secured by loans brokered by Century Mortgage did not provide closing costs or down payments to acquire the real estate. McBride and Wrolstad, and others acting on their behalf, provided the investors with the funds for the down payment and closing costs. McBride and Wrolstad also caused mortgage loan companies to send the loan proceeds by wire transfers in interstate commerce, and caused warranty deeds, deeds of trusts and other closing documents to be sent from the offices of the closing agents by commercial interstate carrier to the lenders and the Recorder of Deeds in Scott County, Mo.
McBride and Wrolstad directed purchasers and closing agents to pay McBride and Wrolstad substantial sums of the mortgage loan proceeds by checks or wire transfers into their personal bank accounts or other bank accounts controlled by them.
There were approximately 341 other transactions involving the sale of residential real estate during the past six years in which McBride and Wrolstad fraudulently obtained mortgage loan proceeds causing losses to lenders and purchases of between $7 million and $20 million. McBride was ordered to pay restitution exceeding $9 million to the lenders and investors defrauded and victimized by the mortgage fraud scheme.
McBride was sentenced on one count of conspiracy to commit wire fraud and mail fraud, 12 counts of wire fraud and 12 counts of mail fraud. In addition, McBride was sentenced on six counts of money laundering. After sentencing, the district court remanded McBride to the custody of the United States Marshals to commence serving his sentence. (usattyedmo111609, 111709)
MORAL
Busy, weren't they? Over 341 properties. Notice the federal agents went back four years for the loans. Mr. McBride gets to think about if over the next 11 years because there is no parole in the federal criminal system and over $9 million in restitution. So whatever property he had he may have no longer if the government brought a forfeiture proceeding.
13 INDICTED IN OREGON FOR MORTGAGE FRAUD
FACTS
On Nov. 19, 2009 a federal grand jury sitting in Eugene, Ore. returned indictments against 13 individuals on a variety of mortgage and loan fraud charges arising out of the collapse of Desert Sun Development, a company previously headquartered in Bend, Ore. According to the indictments, DSD principals and other defendants caused financial institutions to lose more than $19 million. Five separate indictments were returned. Arraignments of all defendants are scheduled for Dec. 16, 2009, before the Honorable Magistrate Judge Thomas Coffin in Eugene.
"The first indictment charges three DSD principals (Tyler Fitsimons of Prineville; Shannon Egeland of La Grande; and Jeremy Kendall of Redmond); and a Bend businessman (John Partin) with conspiracy, bank fraud, making false loan applications to banks, and money laundering, focusing on commercial construction projects. In total, it is alleged that various lending institutions loaned in excess of $25 million to DSD for its commercial construction projects, and suffered a loss of more than $9 million. The indictment alleges that the defendants sought construction financing for five commercial buildings in Bend and Redmond which were never built. As part of the scheme, the defendants are alleged to have made representations that construction was underway, when it was not. John Partin, owner of Advance Steel in Bend, is alleged to have issued false invoices for steel building kits for the non-existent buildings. The indictment also seeks forfeiture of a Ferrari, two Viper automobiles, and other assets related to the fraud and money laundering allegations.
In a second indictment, Robert Brink of Junction City, is charged with making false statements to Umpqua Bank regarding DSD's construction loans. Brink was a construction loan officer at Umpqua Bank. The indictment alleges that on five separate occasions he filed inspection reports with Umpqua Bank certifying that construction was underway on DSD projects, when in fact it was not.
A third indictment charges conspiracy, bank fraud, and false statements to banks in connection with DSD's residential real estate investment program. The defendants in that indictment include Fitsimons, Egeland, Kendall, a fourth DSD employee (Garret Towne of Culver), as well as two mortgage brokers (Shaun Little of Bend; and Del Barber, Jr., of Bend), a bank loan officer (Jeffrey Sprague of Bend), a loan processor (Barbara Hotchkiss of Redmond), and a building materials supplier (Kevin Palotay of Bend).
The indictment alleges that defendants schemed to provide false statements to financial institutions to finance the purchase or construction of residential properties. The allegations include that defendants inflated applicant's income and temporarily parked DSD funds in the applicant's accounts to obtain false proof that the borrowers had independent funds available to them. The two mortgage brokers, loan officer and loan processor are alleged to have assisted in preparing and approving false loan applications, causing them to be sent to financial institutions. Finally, Palotay is alleged to have provided a false invoice to create the false appearance that DSD had purchased construction materials.
In a fourth indictment, Teresa Ausbrooks of Bend, is charged with bank fraud. She is alleged to have made false statements relating to her income and debts in an application to finance DSD's construction of a house for her.
In the fifth indictment, Michael Wilson of Murrells Inlet, S.C., is charged with bank fraud. Wilson is alleged to have been DSD's residential construction superintendent. The indictment alleges that DSD president Tyler Fitzsimons agreed to sell Wilson a $500,000 home built by DSD. The indictment alleges that, to qualify for the loan to purchase this property, Wilson made false statements about his income and assets. (usattyor112009)
USE STRAW BUYERS IN VIRGINIA AND DO 57 MONTHS IN PRISON
FACTS
Godwin Asifo of Woodbridge, Va., was sentenced to 57 months in prison, followed by three years of supervised release, for running a mortgage fraud scheme that resulted in the foreclosure of at least three homes in northern Virginia. He was also ordered to pay $546,685.20 in restitution.
A jury convicted Asifo on Aug. 6, 2009, of two counts of mail fraud and one count of wire fraud. From about May 2005 to June 2006, Asifo recruited straw buyers to purchase at least three homes on his behalf, promising to pay the mortgages and sell the homes for a profit within six months. To ensure the buyers could obtain the loans, he helped to inflate their incomes on loan applications, falsify employment records and provide them with thousands of dollars to artificially inflate their bank accounts.
The three homes were not sold for profit as expected, and the straw buyers ultimately defaulted on the loans because they were not able to afford the mortgage payments, resulting in substantial losses to the lenders. (usattyedva112009)
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