A NEW METHOD OF SHORT SALES GIVING THE SELLER MOVING MONEY
FACTS
A short sale alternative to foreclosure, that pays homeowners to sell at a loss, is the latest bailout tool the feds are putting to work. The Obama Administration recently started the Make Home Affordable Foreclosure Alternatives' short sale effort to help homeowners avoid foreclosures by giving them up to $3,000. Lenders and servicers can also get $1,500 each for short sale deals.
HAFA short sales are available for principal residences acquired before Jan. 1, 2009, which have a mortgage balance no larger than $729,750. The owner's monthly payment must exceed 31% of his or her income and homeowners must prove financial hardship.
Eligible homeowners also must have been previously considered for other federal foreclosure prevention options, but must be considered for the HAFA short sale before the loan is referred to foreclosure.
The lender can't require a cash contribution from the homeowner, nor can the lender require that the owner sign a promissory note at the closing. The lender also cannot go after the borrower for a "deficiency judgment" based on the difference between the selling price and the last mortgage balance.
Homeowners in successful short sales can get up to $3,000 to help with moving costs. Lenders and services can get $1,500 each to help cover costs of the deal. Homeowners can get pre-approved for a short sale before the property is listed and the lender will tell the homeowner the minimum amount acceptable in a short sale.
If the short sale fails, the program comes with a deed-in-lieu-of-foreclosure option; the owner hands over the property to the bank and, just as with the short sale, the lender or servicers can't request any cash from the homeowner, require a promissory note or pursue any deficiency judgments. (calsalin5110)
MORAL
Seems like a contradiction in terms to me. Anybody out there try this? Has it worked? Let me know along with the names of the lenders and I will pass it on.
ARIZONA PASSES FORECLOSURE CONSULTANT LAW SIMILAR TO THE ONE IN CALIFORNIA
FACTS
The Arizona Legislature has passed Senate Bill 1130. This act now regulates foreclosure consultants. Foreclosure consultants who do not comply with the new law are liable for actual damages suffered by the homeowner plus punitive damages not less than one and one half times actual damages and they can be charged with a misdemeanor. The definition of a foreclosure consultant is very broad.
IN CALIFORNIA FAILING TO FOLLOW THE CLOSING INSTRUCTIONS CAN COST THE TITLE COMPANY A LOT OF MONEY
FACTS
Plaza sued North American after North American distributed $53,853 to the attorney in fact of the buyer of real property--a payment Plaza refers to as a "kickback"--that was neither authorized by the closing instructions nor disclosed by North American before it made the payment. North American made the $53,853 payment after escrow closed, based on a last-minute escrow instruction it received from the owner of the property at or near the time of the closing of escrow and did not disclose it to Plaza the wholesale lender. The trail court held North American did nothing wrong. Plaza appealed.
The Fourth Appellate District said reversed. The court explained the trial court erred both when it found there was no breach of the closing instructions contract with Plaza because escrow had closed and when it failed to consider whether North American breached the closing instructions contract when it disbursed the $53,853 payment and closed the two loans to the buyer/borrower without first notifying Plaza of the last minute escrow instruction.
Plaza is a wholesale residential mortgage lender. In March 2007, Plaza loaned $1.1 million to Oliver Aleta for the purchase of a residence located in Northridge, Calif., owned by Monette Santillian (subject property). Aleta's part of the transaction was handled largely by Edward Peregrino, who acted as Aleta's attorney in fact. Plaza lent Aleta 100% of the purchase price, and funded the transaction by way of two loans secured by an $880,000 first deed of trust and a $220,000 second deed of trust. The first lien was a "five-year hybrid option adjustable rate mortgage" that gave Aleta the option to make an interest-only, or a minimum, monthly payment.
On March 1, 2007, Plaza disbursed the loan proceeds to Investors, which paid off (in what the parties call the "sub-escrow") the then-existing liens on the subject property. Investors sent the balance of the loan proceeds to North American for distribution in accordance with the closing instructions contract between Plaza and North American. North American represented that by signing the addendum to the closing instructions, the settlement "agent certifies that there are no additional payoffs or fees that were not disclosed to the lender either verbally or on an Estimated HUD-1." (Italics added.)
At some point in time before North American disbursed the balance of the loan proceeds, Santillian sent a written instruction to North American requesting that it pay $53,853 to Peregrino, Aleta's attorney in fact. North American complied and made the distribution to Peregrino on March 5, 2007. Because the $53,853 payment was not included on the estimated HUD-1, and because North American distributed the money to Peregrino without first disclosing it to Plaza, Plaza did not have actual or constructive knowledge of the payment until March 8, 2007, when it received the final HUD-1, or Final Settlement Statement, prepared by North American. The final HUD-1 disclosed for the first time the $53,853 payment to Peregrino under the rubric "Additional Settlement Charges."
Plaza sued North American for breach of contract, negligence and equitable indemnity. Plaza alleged that North American was contractually obligated to advise Plaza of "all . . . expected closing costs and disbursements prior to closing so that [Plaza] would be advised about the destination of its loan monies." Plaza further alleged North American breached that obligation when, without the knowledge of Plaza, North American disbursed $53,853 to Peregrino despite the fact that payment was not included in the estimated HUD-1. Plaza alleged that had it known of the request for such payment, and/or the fact that Peregrino had signed virtually the entire loan and closing documents on behalf of Aleta, it would have investigated this "irregular transaction" further and potentially not funded the loans at all.
The closing instructions required North American to ensure the loan documents were signed by the borrower and returned to Plaza before disbursement of the loan proceeds, and to disclose the fees and costs of the loans (e.g., broker, processing and other administrative fees), any payments outside of, or credits in connection with, the loans, and the details of the loans themselves (e.g., the name of the borrower, the address of the subject property, the loan amounts and interest rates, and the date of the first mortgage payment).
Aleta, through his attorney in fact, signed the closing instructions acknowledging the fees charged for the loans were acceptable. North American's representative also signed, but did not date, the closing instructions. In so doing, the representative acknowledged: "I have read, understand, and have complied with all requirements listed on these instructions, [and] any Addendums hereto..." (Italics added.)
North American also acknowledged that "Plaza Home Mortgage will not [disburse] funds to cover borrower fees that either do not appear on the Estimated HUD-1 or fees that were not verified by a Closer employed by Plaza Home Mortgage.
"By signing, the settlement agent certifies that there are no additional payoffs or fees that were not disclosed to the lender either verbally or on an Estimated HUD-1." (Italics added.)
We conclude under the plain language of the addendum that before North American closed the loans, it was contractually bound to disclose to Plaza any "additional payoffs" that were not disclosed either in the estimated HUD-1 or verbally by North American.
This duty to disclose continued until the loans closed, and not, as North American argues and the trial court concluded, when escrow closed.
Thus, it is clear from the closing instructions themselves that the parties contemplated that the duties and obligations of North American--including the duty to disburse funds in accordance with the estimated HUD-1, absent disclosure otherwise--continued until the loans, as opposed to escrow, closed. We conclude North American's duties as the settling agent, as opposed to its duties as the escrow agent, continued at least through its preparation of the final HUD-1.
Plaza, as the lender, and North American, as the settling agent, had a direct contractual relationship arising from the closing instructions. Plaza's closing instructions provided for distribution of the loan proceeds based on information it had received from North American in the estimated HUD-1 prepared by North American. North American agreed in the addendum to the closing instructions that the proceeds of the loan would be distributed as set forth in the estimated HUD-1, inasmuch as North American certified that there were no "additional payoffs or fees" that were not included in the estimated HUD-1 or verbally disclosed to Plaza.
The judgment is reversed. On remand, the trier of fact shall determine--consistent with this opinion--whether North American breached the closing instructions contract and if so, whether that breach proximately caused Plaza's damages. Plaza is awarded its costs on appeal. (Plaza Home Mtge vs. North American Title, 4th App. Dist. 4-27-10)
MORAL
If someone is changing anything get the approval of everyone. Then you are protected. In this case it may cost North American a lot of money on retrial plus attorney fees. Read what you sign and do what you read.
FLORIDA HAS THE DUBIOUS DISTINCTION OF BEING NUMBER ONE IN MORTGAGE FRAUD FOR THE YEAR 2009 WITH CALIFORNIA COMING IN THIRD AND ARIZONA IN FIFTH PLACE
FACTS
Florida, New York and California topped the list of states with the highest mortgage fraud and misrepresentation rates in 2009. In 2009 incidents of mortgage fraud increased 7%. Florida took first place in 2006, 2007 and 2009. Arizona has now entered the top five.
The top 10 rankings are:
Florida, New York moved into second place, followed by California, Arizona, Michigan, Maryland, New Jersey, Georgia, Illinois, and Virginia. (jksnvl.com42710)
TWO WOMEN IN ALABAMA STATE GET DISABILITY PAYMENTS IN LOAN APPLICATION AND GET INDICTED FOR MORTGAGE FRAUD
FACTS
On April 28, 2010, Shaquinta Reanne Gates of Birmingham and Silvia D. McBride of Bessemer were indicted by a federal grand jury on charges that they fraudulently claimed on mortgage loan applications that they received monthly government disability payments. In separate indictments the grand jury charged each of them with one count each of mail fraud and making false statements on a mortgage application to a financial institution.
Both women are charged with falsely claiming to receive monthly Social Security Administration disability payments on loan applications they mailed to Wells Fargo. Gates applied for a mortgage loan in February 2007 and McBride in November 2007, according to their indictments. Neither woman would have been eligible to receive loans to buy houses if they had reported their true incomes on the mortgage applications, the indictments say.
The maximum sentence for each count in the indictments is 30 years in prison and a $1 million fine. The indictments seek forfeiture of the loan amounts fraudulently obtained - $74,100 from Gates and $71,000 from McBride. (usattyndal42810)
MORAL
One loan each, one application each, one indictment each three years later. Please note the loan amounts are both under $100,000 and there is only one loan each. I told you the government was stepping up enforcement.
FLORIDA MAN DRAWS SIX YEARS IN PRISON FOR MORTGAGE FRAUD
FACTS
On April 28, 2010, Ramon Cendana of Orlando was sentenced to more than six years in federal prison for his role in a mortgage fraud scheme. The court also ordered Cendana to pay in excess of $240,000 in restitution to his victims. Cendana had pleaded guilty on Jan. 27, 2010.
Cendana owned and operated a title company, a mortgage company and two investment companies. Through those companies, Cendana operated a Ponzi-type scheme soliciting investors (who were often refinancing their own homes to obtain investment proceeds), promising high rates of return on their investments, and then paying early investors with the investments of later investors. The proposed investments, however, never generated any revenue. When investor funds ran low, Cendana used the identification information of his investors to apply fraudulently for loans and lines of credit in the names of those investors. Near the end of his scheme, as both investor funds and the proceeds from the fraudulently-obtained loans and lines of credit ran low, Cendana used his mortgage and title companies to create fictitious mortgage closings, directing the customers who trusted him to refinance their homes to wire him funds to facilitate closings that never occurred. The court sentenced the defendant based upon over $1.7 million in fraud loss. (usattymdfl42610)
MORAL
The more they steal, the more time in prison they spend. Sometimes the lawyer can question the amount of the loss to lower the sentence.
OHIO RESIDENTS HAVE 25 COUNT MORTGAGE FRAUD INDICTMENT RETURNED AGAINST THEM
FACTS
On April 28, 2010, a 25-count federal criminal indictment in Cleveland was returned against Kimberly Wilson, Michael Boyce, Beyond Wynn, Darlena Rogers, Drummell Coffey, Lawrence Calloway, Gerald Ford, Nafessah Walker, Travis Haynes, Antoinece Robin Boyd, Lavon Runderson, Wesley D. Rahmon and Robert M. Wilkes Jr., in a mortgage fraud scheme involving 28 properties throughout the Cleveland area and over $3.25 million in mortgage loans. The indictment charges one count of conspiracy to commit wire fraud, and 24 counts of wire fraud.
The indictment alleges that from June 2005 through January 2007, all 13 defendants conspired to fraudulently purchase 28 properties in the Cleveland area, securing over $3.25 million in mortgage loans. The indictment further alleges that as part of the conspiracy, Defendant Kimberly Wilson, a loan officer for Park Mortgage, completed and submitted fraudulent loan applications in the names of straw buyers (individuals who applied for mortgage loans on a property, but never intend to live in the home). The straw buyers included Defendants Drummell Coffey, Lawrence Calloway, Gerald Ford, Nafessah Walker and Travis Haynes, whose employment, income and assets were falsified in almost every loan application and who concealed the source of the down-payment funds in order to obtain the financing to purchase the 28 properties. The indictment alleges that Defendant Antoinece Robin Boyd assisted in the scheme by falsely verifying employment for Defendants Drummell Coffey and Nafessah Walker through her tax preparing company, Boyd Management, in order for them to qualify for mortgage loans.
The indictment further alleges that Defendants Lavon Ruderson, Wesley D. Rahmon and Robert M. Wilkes, Jr. appraised the properties for a value in excess of the true market value of the properties allowing Wilson, through her companies, Suburban Home Care and Landscaping LLC and Dakaliote LLC, to fraudulently profit by obtaining the excess funds from the mortgage loans for her personal use, and the use of other defendants, such as the straw buyers. Wilson induced the straw buyers to participate by promising they could purchase the properties with no money down and the straw buyers could receive cash back at closing. The indictment also alleges that Defendants Beyond Wynn, Darlena Rogers and Michael Boyce, sellers of 12 of the properties, were aware of, and profited from, the sale of their properties to the straw buyers at the inflated values. The defendants' fraudulent conduct induced Long Beach Mortgage Co., Argent Mortgage Co. LLC, New Century Mortgage Co., WMC Mortgage Co., and Aegis Mortgage Co. to fund the mortgage loans. The victim companies suffered a total loss of approximately $1,942,971 as a result of defendants' scheme. (usattyndoh42810)
MORAL
Note two things: The prosecutors went back to loans that funded five years ago and the other is the federal prosecutors are now prosecuting the straw buyers and the sellers that participate which was not done so heavily before.
MISSOURI MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On April 26, 2010, Aaron Duncan the former CEO and owner of The Duncan Group pleaded guilty to fraud charges involving a $3.9 million investment scheme. According to court documents, Duncan represented that The Duncan Group was involved in real estate investments, including buying, rehabilitating and selling residential real estate. Duncan solicited investors in Missouri and around the United States to participate in his real estate projects through The Duncan Group by making false representations regarding the security of investments and the rates of returns promised. Bank records revealed that Duncan operated The Duncan Group investment program as a Ponzi scheme. Investors who were repaid on their principal investments were paid from funds obtained from other investors, rather than from returns on investments in real estate projects as promised and represented. At no time did Duncan advise investors that their returns, if paid at all, would be paid from other investors' principal. Typically, Duncan falsely told investors that their principal investments were secured by a specific property. For example, some investors were told that an investor's name would be placed on a particular deed or that investors were "securitized" by first mortgages on properties.
Bank records show that beginning no later than December 2005, Duncan was experiencing personal financial problems and was often late on his home mortgage payments. The scheme operated from roughly January 2006 until Duncan advised investors of his intention to declare bankruptcy in October 2008. During the scheme, Duncan received investment principal from more than 50 investors who ultimately lost a total of approximately $3.9 million. Records recovered during the investigation revealed that Duncan only bought approximately 10 properties and that these ten properties lost money in total. Investor money was not used as promised and represented; instead, investor money was routinely used to pay other investors, pay routine expenses of the business, and to pay Duncan's personal expenses.
Duncan pleaded guilty to one felony count of mail fraud and one felony count of money laundering before United States District Judge Carol E. Jackson. Sentencing has been set for July 27, 2010. Mail fraud carries a maximum penalty of 20 years in prison and/or fines up to $250,000; money laundering carries a maximum penalty of 10 years in prison and/or fines up to $250,000. (usattyedmo42610)
MORAL
Do not make promises you cannot keep. They call it criminal fraud.
WASHINGTON MAN SENTENCED TO 37 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On April 27, 2010, Jeremy Richardson of Vancouver, Wash., was sentenced to 37 months in federal prison in the Washington U.S. District Court after his 2008 guilty plea to money laundering. Richardson's money laundering activity related to a mortgage fraud scheme which affected approximately 100 properties in Oregon and southwest Washington. Richardson was also ordered to pay restitution of more than $496,000 to various individuals and four title companies directly harmed by his fraud scheme.
Richardson admitted that he advertised and solicited persons interested in buying real estate, either to live in or as an investment. If an investor was not able to qualify for the necessary mortgage financing, Richardson would falsify the buyer/investor qualifications and information provided to the lender. If the home was being purchased as an investment, Richardson would advertise for persons interested in participating in a "rent to own" program to live in the home purchased by the investor.
Richardson admitted that he inflated the property transaction price on certain transactions in order to get extra money to use to pay business expenses including required mortgage payments on purchased real estate. He created false invoices purporting to represent repairs performed on certain properties in support of the falsely inflated prices. He also induced some customers to advance him money which he represented would be used to make a down payment on certain properties, but which he instead used to pay personal and business expenses. Evidence indicated that Richardson's scheme involved real estate financing transactions on as many as 90-100 residential properties.
Richardson will serve a three-year term of supervised release upon his release from prison. He is required to surrender for service of his sentence no later than June 10, 2010. (usattyor42810)
MORAL
Anyone reading this do "Rent-to-Own" programs?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
