FHA WILL NO LONGER APPROVE LOAN CORRESPONDENTS
FACTS
First, mortgagees would be required to ensure that their loan correspondents meet applicable requirements. Second, the proposed rule would update the FHA regulations to incorporate criteria specified in the Helping Families Save Their Homes Act of 2009 that precludes certain lending entities from originating an FHA insured loan, and are designed to ensure that only entities of integrity are involved in the origination of FHA insured transactions. Third, FHA proposes to increase the net worth requirement for FHA approved mortgagees for the purpose of ensuring that approved mortgagees are sufficiently capitalized. Comments on this proposed rule are due Dec. 30, 2009. (74FR62521)
Except as modified by this proposed rule, all other components of the lender approval process would remain the same, including those provisions regarding the monitoring and enforcement of FHA requirements, the imposition of sanctions, and the opportunity to appeal adverse determinations
Loan correspondents will continue to be authorized to participate in the origination of FHA loans through association with an FHA-approved mortgagee, but these entities no longer will be subject to the FHA lender-approval process.
FHA-approved mortgagees (direct endorsement lenders) would be required to ensure that their loan correspondents meet applicable requirements. The FHA-approved mortgagee acts as sponsor as it has in the past, but in using a sponsor/correspondent relationship, the sponsoring mortgagee must agree to assume responsibility for any loan correspondent that works with the mortgagee in the FHA-insured loan for activities related to the loan origination, and assume liability for the FHA-insured loan underwritten and closed in the name of the FHA-approved mortgagee. Not only would FHA-approved mortgagees be required to ensure that sponsoring loan correspondents meet standards assuring their integrity and financial soundness, including those recently emphasized in the Helping Families Save Their Homes Act, but to also ensure compliance by all parties to an FHA transaction with FHA's requirements regarding loan origination, processing, underwriting, and servicing and found in relevant statutes, regulations, HUD handbooks, and mortgagee letters.
Although loan correspondents no longer would be subject to lender approval requirements, the FHA-approved mortgagee must ensure that any loan correspondent that the mortgagee sponsors complies with the requirements that make loans eligible for FHA insurance. Failure to comply with these requirements may result in FHA seeking sanctions against the FHA-approved mortgagee. These requirements among others include the language from the Helping Families Save Their Homes Act which provides among other things that no loan correspondent company may be on the LDP or Debarment list and no officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter or loan originator of the approved mortgagee or the loan correspondent shall be: currently suspended, debarred, under a limited denial of participation; under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant's integrity, competence or fitness to meet the responsibilities of an approved mortgagee; subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review; subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review; convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry during the seven-year period preceding the date of the application for licensing and registration; or at any time preceding such date of application, if such felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering; in violation of provisions of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of state law; or "in violation of any other requirement as established by the Secretary."
Net worth of DEs is to increase to $2.5 million over the next three years. In the first year the net worth is to be $1 million with at least 20% liquid and the remaining $1.5 million must be in place at the end of the next two years with 20% liquid meaning $500,000.
FHA-approved mortgagees must only 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. This means do not abbreviate, do not use acronyms and do not use short cuts. Use the full name as on file with FHA.
All advertising material and promotional material in whatever form shall be saved for two years in the event HUD decides to audit your advertising.
Further still, mortgagees shall notify FHA if individual employees of the lender are subject to any sanction or other administrative action. HUD also is proposing to codify its existing requirements pertaining to notification to FHA of business changes, such as changes in legal structure.
UNDER THE NEW RULE, loan correspondents and other non-FHA approved lenders can continue to be involved in FHA loan origination by working with FHA-approved mortgagees. Loan correspondents and other third-party originators would be exempt, however, from completing the FHA lender approval process. (24 CFR Part 202, 74 FR 62521, 11-30-09)
Additionally, approved mortgagees must submit audited or unaudited financial statement, within 30 days of the end of each fiscal quarter in which the mortgagee experiences an operating loss of 20% of its net worth, and until the mortgagee demonstrates an operating profit for two consecutive quarters or until the next recertification, whichever is the longer period; (24cr202.5(m)).
MORAL
In a nutshell: DEs must have $1 million net worth in one year after rule is in effect with 20% liquid. DEs must modify their quality control plan the minute this rule goes into effect. At the time this rule goes into effect, your quality control plan will be out of date.
MARYLAND MAN PLEADS GUILTY TO MULTI-MILLION DOLLAR MORTGAGE FRAUD
FACTS
On Nov. 30, 2009, Michael Milan of Bethesda, Md., pleaded guilty to conspiracy to commit mail and wire fraud for his role in carrying out a multi-million dollar mortgage fraud scheme. Milan faces a maximum penalty of 20 years in prison when he is sentenced on Feb. 12, 2010. As part of his guilty plea, Milan has agreed to pay restitution of $3,141,409 and to forfeit $1,061,890.31 in proceeds he obtained.
Milan admitted that he was a consultant to various mortgage brokerage companies and conspired with others to defraud mortgage lenders into lending funds for the purchase and refinance of residential properties. Milan caused his associates to prepare false mortgage applications which contained false information about the income and assets of the borrowers. Some of the mortgage applications falsely claimed that the borrowers earned hundreds of thousands of dollars from a company, Collid LLC, which Milan controlled. Milan's conspiracy submitted fraudulent loan applications for the purchase or refinance of 11 different properties and caused losses of more than $2.5 million but less than $7 million.
Milan fled from the United States after the execution of a search warrant at his office in June 2008 and did not return until April 2009. During a detention hearing held after his return, Milan attempted to explain his extended flight from the U.S. by providing fraudulent Iranian court documents, which falsely claimed that he had been incarcerated in Iran during the summer of 2008. As part of his plea, Milan acknowledged that he attempted to obstruct justice with these false documents. Milan is the sixth defendant convicted by the investigation. Others convicted include a settlement agent, a loan officer who worked with Milan, and Milan's son, Dustin Milan. (usattyedva12109)
MORAL
I would say he is looking at a lot of time due to the fleeing and then lying about it when he came back. He may be looking at 10 years in a federal hotel.
SEVEN KANSAS CITY RESIDENTS INDICTED FOR PURCHASING ONE HOME USING MORTGAGE FRAUD
On Dec. 3, 2009 seven Kansas City, Mo., residents were indicted by a federal grand jury for their roles in a mortgage fraud scheme that involved the purchase of a $605,000 house in Parkville, Mo.
Lloyd Claerhout, Scott J. Schirmer, William R. Wonder III, David E. Twitty, Cameron D. Bennett, Jennifer R. Hernandez and Katherine S. Sartain, all of Kansas City-North, were charged in a two-count indictment returned by a federal grand jury in Kansas City. The federal indictment alleges that each of the defendants participated in a conspiracy to commit bank fraud from July to October 2007. In addition to the conspiracy, each defendant is charged with one count of bank fraud. According to the indictment, the defendants planned to purchase the property for $605,000 then immediately re-sell it at a profit.
Schirmer allegedly located a residential property at 8118 Clearwater Pointe in Parkville, with the understanding that it would be purchased and then resold at a profit to everyone involved. Schirmer paid Wonder $3,000, the indictment says, in order to use his name for the initial purchase of the property.
Wonder completed a loan application, with the assistance of Bennett and Twitty, which contained false financial information. Wonder allegedly signed two loan applications for Bank of America, totaling $605,000, which each contained false information regarding his monthly income, employment and bank account balances.
Schirmer then arranged to have Claerhout purchase the property from Wonder at a profit. Schirmer allegedly arranged the collection of the necessary down payment from Bennett, Wonder, Twitty and others to assist Claerhout in the purchase of the property. Co-defendants allegedly submitted loan applications and supporting documentation containing material false representations to North American Savings Bank, the mortgage lender.
Claerhout allegedly signed a Uniform Residential Loan Application for $637,600, which contained false and fraudulent information regarding his monthly income, employment, and bank account balances, in order to obtain a loan for a portion of the purchase.
Hernandez, who was employed as a teller at Mazuma, allegedly signed a "Request for Verification of Deposit" which stated that Claerhout had a current balance of $127,131 in his savings account, and an average balance for the previous two months of $127,882. Hernandez allegedly manipulated the records by transferring funds from other Mazuma accounts into Claerhout's account to falsely reflect a substantial savings account balance, then later voiding the transfers.
Sartain, a real estate agent, allegedly signed a "Request for Verification of Rent or Mortgage Account" which falsely indicated that Claerhout was paying $4,300 rent.
The charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence. (usattywdmo12309)
MORAL
It appears they never even got to purchase the house before they were indicted. I keep telling you has I have for months, the federal mortgage task force is out en masse. If you have been involved in any mortgage fraud in the last 10 years (that is how long the federal government has to indict you) I strongly recommend you see and discuss with your attorney now.
SO YOU THINK BANK OF AMERICA IS NICE? NOT IN NEW JERSEY WHERE THEY LOCKED A WOMAN OUT OF HER OWN HOME AFTER THANKSGIVING AND AFTER AGREEING TO A LOAN MODIFICATION
FACTS
Nina Morris, a New Jersey woman, returned home from Thanksgiving with family to find the locks changed days after she avoided foreclosure. Bank of America says it made a mistake. Nina Morra was locked out of her fully furnished Trenton home for three days by an inspector hired by the bank.
Ms. Morris was away when the inspector showed up on Nov. 22. Bank of America spokeswoman Jumana Bauwens says the inspector changed the locks because he thought the dwelling was vacant. Morra had received a letter from the bank days earlier saying she had been accepted into a new payment program. The bank spokeswoman says she thinks the lockout occurred because the timing was so close. Morra became delinquent on her mortgage when she suffered a stroke in January 2009. (apazcen.com12409)
MORAL
Translation of the above. Woman has a stroke; bank says we will work with you. Gives her a payment plan AND THEN AFTER GIVING THE PAYMENT PLAN LOCKS HER OUT OF HER OWN HOME. I would call that trespass, conversion and emotional stress and that is just for starters. The bank says it is working with its borrowers to keep them in their homes but does not even communicate among its own employees. Come on, how difficult is it for the person working a plan knowing the property has been put in foreclosure status to look it up and call of its own dogs? I guess that was not in the loan modifier's job description.
OKLAHOMA MAN SENTENCED TO 30 MONTHS IN FEDERAL PRISON FOR MONEY LAUNDERING IN MORTGAGE FRAUD
FACTS
On Dec. 2, 2009 Phillip Seibel of Edmond, Okla., was sentenced by United States District Judge David Russell to serve 30 months in prison for money laundering stemming from a mortgage fraud scheme. Judge Russell ordered Seibel to pay $770,037.31 in restitution and serve three years of supervised release upon release from prison.
Seibel was a licensed mortgage broker who formed Homesavers LLC in April 2007 headquartered in Oklahoma City. Homesavers contacted homeowners who were facing foreclosure and told them that Homesavers would allow the sellers to stay in their homes while the sellers worked to improve their credit. Homesavers promised to find investors to purchase the sellers' homes and to allow the sellers could stay in their homes and begin paying "rent" to Homesavers, which promised to use those rent payments to pay the mortgages. Homesavers further promised that the sellers could repurchase the homes for a fixed price when their credit improved.
Homesavers promised potential investors that their only role would be to purchase the homes and that Homesavers would coordinate all rent payments with the sellers and ensure that the mortgages were timely paid. Homesavers then assisted the investors in obtaining financing to purchase the homes and regularly submitted false documents on the investors' behalf to mortgage companies and/or assisted the investors in submitting and/or signing false documents to the mortgage companies.
At closing, Homesavers would arrange to receive the equity checks directly and, without permission, endorse the sellers' names and deposit the checks into Homesavers' bank account. Homesavers did not make the mortgage payments on the homes as promised but repeatedly assured the sellers falsely that mortgage payments were being made. Most of the homes were foreclosed upon, and the sellers lost all equity in their homes. The money gained from Homesavers was used to pay personal expenses, such as personal mortgage payments, car payments, and country club memberships.
Seibel pled guilty to money laundering on July 22, 2009. Seibel was ordered to report to the Bureau of Prisons on Jan. 4, 2010, to begin serving his sentence. (usattywdok12309)
MORAL
This is really preying on the weak!
FORMER RHODE ISLAND ATTORNEY DRAWS 42 MONTHS IN PRISON FOR STEALING MORTGAGE FUNDS
FACTS
On Dec. 1, 2009 a federal judge sentenced Pasquale Scavitti III, a former attorney based in Cranston, R.I., to 42 months in prison for diverting more than $2.5 million in mortgage funds from his firm's client account for personal use. The judge also ordered Scavitti to pay a total of $2,496,812 in restitution to various individuals and financial institutions.
In June, Scavitti pleaded guilty to wire fraud. At the plea hearing, Assistant U.S. Attorney Andrew J. Reich said the government could prove that Scavitti maintained a law practice in Cranston and shared his office space with other attorneys. As part of his practice, he maintained a client escrow bank account. Mortgage Guarantee and Title Co., a real estate title and closing company, utilized the services of Scavitti's law office to facilitate mortgage lending. As part of those services, mortgage and refinancing proceeds were wired into the client escrow account at Scavitti's firm. The firm's obligations were to pay off existing liabilities from those loan proceeds.
Between 2003 and August 2008, Scavitti directed that client escrow account funds not be used to pay off the corresponding existing mortgages but rather to pay for various personal and business expenses. Escrow funds were also used to pay off previously negotiated mortgages that were already delinquent, since they had not been paid off in a timely fashion. Some of the proceeds that Scavitti caused to be diverted were used to pay off personal mortgage expenses. Other diverted funds were used to pay gambling expenses. In a four-day period in 2004, Scavitti bought $23,000 worth of casino chips at Foxwoods Casino.
In September 2007, Mortgage Guarantee terminated the authority of Scavitti's law office and its attorneys from acting as approved attorneys for Mortgage Guarantee. However, for subsequent mortgages, Scavitti contacted other attorneys to act as title attorneys on real estate transactions and closings. For these transactions, Scavitti falsified letters purporting to authorize his firm to act as the approved attorney for Mortgage Guarantee. As before, loan proceeds were deposited into the escrow account at Scavitti's firm, and Scavitti directed that they not be used to pay off the corresponding existing mortgages but instead be used for various personal and office expenses.
As a result he failed to pay off 13 mortgage loans and refinancing transactions, resulting in total losses of approximately $2.5 million to borrowers and financial institutions. (usattyri12209)
MORAL
Kinda makes you wonder why did it take the title company five years to figure out that the mortgages were not being paid off?
VIRGINIA MAN SENTENCED TO 48 MONTHS IN FEDERAL PRISON BECAUSE OF MORTGAGE FRAUD
FACTS
Hayung Peter Jin of Centreville, Va., was sentenced today to 48 months in prison, followed by three years of supervised release, on fraud charges involving his loan brokerage business, known as Business Capital and Investments, Inc., located in Annandale, Va. Jin was also ordered to pay restitution in the amount of $665,000. Jin pled guilty to multiple fraud charges and aggravated identity theft on Aug. 17, 2009. Jin admitted his involvement in two separate schemes involving his loan brokerage business, which served primarily Korean Americans in the Washington metropolitan area.
The first scheme occurred in October 2005, when Jin convinced a former client to sell his Loudoun County home to another person, a South Carolina businessman named Han; however, Han had never agreed to purchase the home. Jin used Han's name and Social Security number to obtain financing for the apparent purchase of the home, plus additional home equity loans in Han's name. Jin, who was a licensed notary public, fraudulently notarized Han's signatures on loan documents. The total amount of fraudulently obtained financing was $620,000. (usattyedva12409)
MORAL
Using his ethnicity to prey on innocents because of the common language. Remember, investigate first and buy later. It is a lot cheaper. The lender must not have had the new Red Flags Identity Theft Manual required by the FTC as mandatory starting June 1, 2010. If you do not have it you can purchase it from our firm by calling Loretta at 888-667-8529.
STATE OF WASHINGTON HAS ADOPTED NEW RULES
FACTS
The rules are extensive and the changes are major. If you are licensed in Washington State I would recommend downloading them and reading them once very carefully and then saving them for future reference. Go to
MORAL
Remember, there are many, many, many, changes in the state and federal laws and the state and federal regulations governing mortgage loans. Not to read them is a way to lose the unique identifier that NMLS Registry gives you and thereby prevents you from doing loans in any state.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
