INVESTORS SUE MORTGAGES LTD. OF ARIZONA, ITS LAWYERS, ACCOUNTANTS AS WELL AS OTHERS FOR $900 MILLION
FACTS
On May 11, 2010 investors in Mortgages Ltd. filed a $900 million lawsuit alleging the bankrupt investment firm's lawyers and accountants should have blown the whistle on its risky lending practices. The lawsuit's plaintiffs argue that three large professional-services firms intentionally helped Mortgages Ltd. and former investment partner Radical Bunny LLC defraud investors.
The three firms, not named as defendants in previous Mortgages Ltd. lawsuits, are Miami-based law firm Greenberg Traurig LLP, Milwaukee-based law firm Quarles & Brady LLP and accounting firm Mayer Hoffman McCann PC, which is based in St. Louis.
"Mortgages Ltd. and Radical Bunny could not have perpetrated and concealed a fraud so massive without the complicity of lawyers and accountants," alleges the lawsuit, whose plaintiffs include investors Robert Facciola, Honeylou Reznik and Fred Hagel. "These professionals provided a façade of legitimacy to the scheme." Representatives of the two law firms have issued statements denying the allegations and expressing their readiness to defend against them in court. Both Mortgages Ltd. and Radical Bunny are insolvent and in bankruptcy.
Mortgages Ltd. financed several high-profile projects in the Phoenix area during the real-estate boom that began in 2005. In June 2008, after the death of Mortgages Ltd. chief executive Scott Coles, the lender was forced into bankruptcy by developers.
In April 2010 at the conclusion of an investigation that lasted nearly two years, the Arizona Corporation Commission ordered Radical Bunny to pay $190 million to investors. It found that Radical Bunny, which loaned money from almost 900 investors to Mortgages Ltd., was not registered as a securities dealer, misled investors about the degree of risk, and continued to solicit investment after its lawyers warned that doing so would violate securities laws. (azrep51810)
MORAL
Let me understand this. The investors are suing the lawyers because they warned Radical Bunny not to continue to solicit investors because it would violate securities law? Or do I have it wrong. Good luck with the lawsuit against the Greenburg firm, you will need it.
FOUR ARRESTED, FIVE WANTED IN SOUTHERN CALIFORNIA FOR FLEECING HUNDREDS SEEKING FORECLOSURE RELIEF
FACTS
On May 20, 2010, California Attorney General Edmund G. Brown Jr. announced that nine men engaged in a Southern California boiler room, tricked out in high-roller style with a roulette wheel and other casino equipment, have been charged with 97 criminal counts for stealing at least $2.3 million from more than 1,500 homeowners who were promised loan modifications but received no relief. The 97 criminal counts filed against the nine defendants, include 63 counts of grand theft, 26 counts of unlawful foreclosure consulting, seven counts of tax evasion and one count of conspiracy
Arrested were Greg Scott Quinn and Juan Pierre Washington, who worked as company sales managers and supervisors. They are being held at Los Angeles County Jail.
Gary Arnold Eisenberg and Ira Itskowitz each spent more than five years in federal prison for previous fraud convictions and are already in federal custody for violating parole in connection with their participation in the scheme.
The four principal owners of the business, Niv Iskin, Reviv Karpman, Tomer Kogman and Avraham Yechizkia, along with Barel Iskin, are still being pursued by law enforcement.
Brown's office initiated its investigation in March 2009 in response to numerous consumer complaints against the defendants' Canoga Park-based loan modification business, which operated as Mason Capital Group LLC and Gretchen Fox and Associates.
Between January 2008 and June 2009, the four owners took in at least $2.3 million in up-front fees, which ranged from $1,000 to $5,000, from more than 1,500 homeowners throughout the country. In almost every case, no loan modifications were completed, as promised. Financial records indicate that the four owners spent hundreds of thousands on private school tuition, travel, entertainment, shopping and other personal expenses while running Mason Capital Group LLC and Gretchen Fox and Associates.
The four owners used a telemarketing operation that targeted homeowners facing mortgage payment increases or foreclosure. During an initial call, the telemarketers touted the company's team of "attorneys, forensic accounting personnel, and loan negotiators" available to negotiate reductions in interest rates, monthly payments and principal balances; their supposed 90% to 100% loan modification success rate and refund guarantee. The telemarketers then collected financial information from homeowners to determine if they "qualified" for the company's services.
Soon after the initial call, homeowners received a follow-up call to inform them that their case had been "reviewed" and "approved." Telemarketers closed sales by insisting the approval would expire unless homeowners acted quickly, while reminding them about the refund guarantee if promised results were not achieved.
The company completed very few loan modifications, rarely contacted lenders, failed to honor the refund guarantee, employed unlicensed "loan processors" and had no legal staff negotiating with lenders.
While homeowners waited, they were told their loan modifications, or refunds, would be voided if they tried independently to contact their lender. Many lost their homes to foreclosure as a result.
To skirt the state's foreclosure laws, avoid paying refunds and conceal profits, the owners changed company names, claimed bankruptcy and shifted loan modification files to another business they created called American Financial Group LLC.
MORAL
Please remember, no advance fees allowed by anyone for loan modifications at all, including attorneys.
CALIFORNIA MOTHER AND DAUGHTER CHARGED IN $2.3 MILLION MORTGAGE FRAUD
FACTS
Alice Kantin and her daughter Dawn Marie Kantin, both of Kern County, Calif., have been charged with bilking dozens of people out of more than $2.3 million in an alleged real estate scam.
Prosecutors say the two of them ran a company called Desert Air Real Estate Investments Inc., which entered into rent-to-own agreements with at least 32 people. They say distressed homeowners would sign over their houses to the company, and then pay rent that would go toward the mortgage. But, prosecutors say, the women didn't put the rent money toward the mortgage, and the homes went into foreclosure.
The Kantins are each charged with 44 counts, including conspiracy, embezzlement and forgery. Alice Kantin pleaded not guilty on May 18, 2010 and her daughter entered the same plea on May 19, 2019. (mercsnstr51910)
MORAL
It is amazing when you think about the fact that this type of scam has been going on for years and people would learn. I guess they do not listen to the news on TV nor read the papers.
SIX INDICTED FOR MORTGAGE FRAUD IN OAKLAND
FACTS
On May 14, 2010 United States Attorney Joseph P. Russoniello announced that a federal grand jury in Oakland indicted the following individuals on charges of conspiracy to commit mail and wire fraud: James Delbert McConville, a/k/a Delbert James McConville; Laura Margery Caton, a/k/a Laura Margery Tate, a/k/a Laura Gussman; Araks Davoudi, a/k/a Araks Galstanian; Donna Demello, a/k/a Donna Demello Martin, a/k/a Donna Kay McDaniel, a/k/a Donna Kay Demello; Jason Arthur Piette and Rasul Rasull.
According to the indictment, McConville purchased hundreds of condominiums throughout California in the names of straw buyers, individuals who were promised $5,000 to $10,000 for the use of their name and credit. The loan applications are further alleged to have contained false information about the employment, income, and assets of the straw buyers. Davoudi is alleged to have worked at Citibank as a personal banker during the conspiracy. She is charged with creating fraudulent verifications of bank deposits for some of the straw buyers. The escrow agent, Demello, is charged with creating a fraudulent final settlement statement that concealed large payments to individuals and entities controlled by McConville. That fraudulent version of the final settlement statement was sent to the lenders funding the loans. The indictment also alleges that McConville laundered the proceeds of the fraudulent scheme by writing checks for the purchase of expensive works of art and a valuable Superman comic book.
The whereabouts of McConville are unknown at this time. Caton was arrested on May 14, 2010 in Oakland and made her initial appearance in San Francisco. She was released on a $250,000 secured bond. The maximum statutory penalty for each count of conspiracy in violation of Title 18, United States Code, Section 1349 is 30 years' imprisonment and a fine of $1 million or twice the gross gain or loss involved in the conspiracy, whichever is greater. The maximum statutory penalty for each count of money laundering in violation of Title 18, United States Code, Section 1957 is 10 years' imprisonment, and a maximum fine of $250,000. (usattyndca51410)
MORAL
Does anyone know any of the six? If you do you may want to consult your attorney as to the relationship.
SIX INDICTED ON 10 COUNTS IN SAN DIEGO FOR $20 MILLION MORTGAGE FRAUD
FACTS
On May 20, 2010, a 10-count indictment has been unsealed charging six individuals with conspiracy to commit wire fraud and wire fraud. The defendants are charged with submitting false and fraudulent mortgage loan applications and related documents to banks and other lending institutions, thereby inducing the institutions to make approximately 36 loans totaling approximately $20,800,000.
Those charged with participating in the conspiracy are: Brian Andrew La Porte, Daniel John Schuetz, Michael Wayne Wickware, Roxette Yvette Hempstead, Darryl Anthony Wallace (a/k/a Darryl Anthony White) and Terrence Smith (a/k/a Terry Lee Smith). The indictment alleges that the defendants devised a scheme to defraud mortgage lenders and to obtain money and property by false and fraudulent means and diverted the proceeds for their personal use and benefit.
According to the indictment, from May 2008, the defendants agreed to submit false loan applications to mortgage lenders to obtain financing to purchase residential properties. The defendants recruited "straw buyers" who had sound credit histories but who otherwise would not have qualified to purchase the residential properties selected by the defendants. The indictment further alleges that, as part of the conspiracy, Brian Andrew La Porte and Daniel John Schuetz prepared fraudulent loan applications on behalf of the straw purchasers, falsely stating the employment and monthly salaries of the straw purchasers.
The indictment further alleges that the defendants submitted fraudulent loan applications on behalf of the straw purchasers to mortgage lenders, including OwnIt Mortgage Solutions Inc., WMC Mortgage Corp., Argent Mortgage Co., Countrywide Home Loans, First Franklin, Finance America LLC, and other mortgage lenders. The defendants then caused escrow agents to disburse the funds to the defendants and others so that the defendants could divert to themselves and others the proceeds of the fraud.
The maximum penalty for each of the 10 counts is 20 years in custody and a $250,000 fine. (usattysdca52010)
MORAL
Like I said the federal agents are out there.
CONNECTICUT WOMAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On May 17, 2010 Rose Garcia of Clinton, Conn., waived her right to indictment and pleaded guilty before United States District Judge Vanessa L. Bryant in Hartford to one count of conspiracy to commit mail fraud and wire fraud.
Garcia worked for Jose Guzman, who operated a mortgage business that arranged for individuals to obtain funding from various mortgage companies to fund mortgages of houses. Operating through various mortgage brokerage, property management and home improvement companies, Guzman and his co-conspirators arranged for "borrowers" to obtain funding from various mortgage companies and mortgage originators. The borrowers usually were individuals who had good credit but were of modest means with low levels of income. Guzman and his co-conspirators located real estate properties to be purchased by the borrowers using the funds loaned from various lenders. In order to recruit and entice the individuals to act as the borrowers, Guzman and others, at times, compensated the borrowers. In order to secure the funding from lenders, Guzman and his co-conspirators, including Garcia, falsified material information on the borrowers' mortgage loan applications, including information regarding income, assets, employment, rent history, as well as the borrowers' intention to make the properties their primary residence.
Garcia was an employee of Guzman's real estate, mortgage brokerage, and property management businesses. As an employee, she assisted Guzman and his partners in the buying and selling of properties and in the closings of the real estate deals. In pleading guilty, Garcia admitted that she assisted in the preparation and submission of fraudulent closing documentation to lenders, including verification of rent, verification of deposits and verification of employment. Garcia also admitted that, when called by lenders seeking to verify the information contained in the submitted documents, she would confirm the false information.
The co-conspirators collected large commissions, fees and other money from the fraudulently conducted real estate transactions. During the time that Garcia worked for Guzman, the co-conspirators caused more than 200 mortgages to be funded. As a result of defaults on the mortgages, the lenders suffered losses of more than $3.6 million.
Judge Bryant has scheduled sentencing for Feb. 7, 2011, at which time Garcia faces a maximum term of imprisonment of five years.
Guzman previously pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. He awaits sentencing. (usattct51710)
MORAL
And on and on the mortgage fraud goes. Do not do it. It is never worth it.
INDIANA MORTGAGE BROKER ACCUSED OF MORTGAGE FRAUD
FACTS
Kathy Lynn Puckett is accused of submitting false information to lenders while working as a mortgage broker for Richmond Mortgage, which she co-owned. Those crimes allegedly took place between March 2006 and February 2008. Puckett is also accused of directing an acquaintance to remove documents from files that had been requested by FBI agents.
If convicted, Puckett would face up to 20 years in federal prison and a $250,000 fine.
Puckett in May 2008 was sentenced to 42 months in prison after she was convicted of conspiracy to commit battery. Authorities said Puckett hired four people to attack a Richmond real estate investor, who was severely beaten in June 2006. She was released from prison last June, according to state Department of Correction records.
She was also convicted of theft in January 2007, drawing a suspended sentence and a restitution order after she admitted stealing $22,395 from the Richmond car dealership where she worked. (strprs52010)
MORAL
Remember, she is innocent until proven guilty in a court of law. But if the above is true, she sure was a busy little beaver.
MARYLAND MAN SENTENCED TO THREE YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD AND TO FORFEIT ASSETS DERIVED FROM SCHEME
FACTS
On May 19, 2010, U.S. District Judge Benson Everett Legg sentenced David Wehrs Sr., of Annapolis, Md. to three years in prison followed by three years of supervised release, with the first year to be served on home detention with electronic monitoring, for wire fraud in connection with a scheme to defraud investors and financial institutions. Judge Legg also entered an order that Wehrs pay nearly $2.4 million in restitution and to forfeit any assets derived from the scheme. Any forfeited assets will be applied to the restitution amount.
Wehrs owned Maryland Title and Escrow Co. Inc., Annapolis, and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs "guaranteed" would pay monthly interest payments of 10.85%. Instead of depositing the money into an "American Funds Fixed Rate Money Market" as promised, Wehrs deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs wire transferred a large portion of these investor funds to a brokerage account in the name of his title company, and then used the money to day trade. Day trading is the rapid buying and selling of securities throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes that they are owned, allowing a person to lock in quick profits. During the scheme, Wehrs conducted millions of dollars of stock trades per month. From early 2008 until mid-2009, Wehrs lost approximately $1 million.
In addition to day trading, Wehrs used some of the investor funds to: pay "monthly interest" and "redemptions" to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.
Wehrs admitted that in June 2009, when he had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing that amount of loss to the title insurance company for Maryland Title. He also used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individual's home to pay interest to investors, causing a loss of $100,000 to the homebuyer.
The total loss as a result of Wehrs' scheme is $2,365,128 to investors and the title insurance company. (usattymd51910)
MORAL
Forfeit assets. Please note that. There goes the house, the jewelry and the cars.
THREE FORMER MISSOURI BROKERS SENTENCED FOR $1.2 MILLION MORTGAGE FRAUD
FACTS
On May 17, 2010, U.S. District Judge Gary A. Fenner sentenced Charles M. Davis to four years and three months in federal prison. The court also ordered Davis to pay $1,271,590 in restitution. Scott Allen Kassebaum was sentenced to two years in federal prison and ordered to pay $209,100 in restitution; His wife, Cheryl Joan Kassebaum was sentenced to 15 months in federal prison and ordered to pay $497,200 in restitution. Steven Ray Spencer was sentenced to two years and six months in federal prison and ordered to pay $436,556 in restitution. Shanda Lynn Moore was sentenced to three years of probation, including six months of home confinement, a $3,000 fine and restitution of $262,755.
Davis, a former mortgage broker who was the owner of Master Marketing Consultants, pleaded guilty to his participation in two separate conspiracies to obtain mortgage loans for the purchase of homes based on false loan applications. Davis knew that the loan applications he prepared and submitted were false because the loan applications included overstatements of income and understatements or omissions of liabilities, falsely represented that the purchaser/borrower intended to reside in the home to be purchased, and, in some cases, stated a false place of employment for the purchaser/borrower.
A significant portion of the loan proceeds was returned to the purchasers of the homes (who also were the borrowers) without the lender's knowledge. Davis facilitated these kickbacks to the purchasers by routing the proceeds through Master Marketing Consultants and, in some cases, through Metro Consulting Group, which was owned by the Kassebaums.
The mortgage fraud schemes involved a total of 20 houses with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.
In addition to the two conspiracy charges, Davis pleaded guilty to two counts of wire fraud and two counts of money laundering.
The Kassebaums, former mortgage brokers and co-owners of Metro Consulting Group, pleaded guilty to their roles in one of the mortgage fraud conspiracies with Davis that involved seven houses with home mortgage loans ranging from approximately $200,000 to more than $400,000. The Kassebaums prepared and submitted fraudulent loan applications to lenders and facilitated the return of a significant portion of the loan proceeds to themselves and other purchasers without the lender's knowledge and outside the closing of the home purchase.
Cheryl Kassebaum also pleaded guilty to one count of wire fraud and one count of money laundering. Scott Kassebaum also pleaded guilty to one count of wire fraud and one count of money laundering.
Spencer pleaded guilty to his role in both of the mortgage fraud conspiracies. In each conspiracy, he was a purchaser and solicited other purchasers for the schemes. Spencer also pleaded guilty to one count of wire fraud and one count of money laundering.
Moore pleaded guilty to her role in one of the mortgage fraud conspiracies with Davis and Spencer. Moore admitted that she provided false employment verification for Spencer and another individual. (usattywdmo51810)
MORAL
Note two things: 1- They were convicted because they returned money to the borrower without the lender's knowledge. 2-They also were convicted because they said the property would be owner occupied and the homes were not owner occupied.
SIX PEOPLE INDICTED FOR ALLEGED $3.5 MILLION MORTGAGE FRAUD IN PORTLAND, OR
FACTS
Six people have been indicted on federal charges involving an alleged $3.5 million mortgage fraud scheme while working for the Lighthouse Financial Group in the Portland, Ore. metro area.
Joel Rosabal and Chad Amsden were named in the first of two indictments, while the second indictment listed Amsden, Timothy Hills, Misti Wallis, Gerald Wallis and Jo Schermerhorn.
Rosabal and Amsden were accused of a conspiracy to defraud lending institutions by making false statements to get home loans at an inflated price, resulting in kickbacks. The federal grand jury indictment also accused Rosabal and Amsden of using various professionals to carry out their conspiracy, including licensed real estate agents, home builders, loan officers and tax preparers.
The amounts listed in a separate section of the indictment alleging wire fraud against the pair ranged from about $89,000 to more than $543,000.
In the second indictment, Amsden and the other defendants were accused of making false statements to the former Washington Mutual Bank, to obtain a $664,000 construction loan using the name of the mother of Misti Wallis because of her high credit score.
Federal prosecutors said the complicated scheme was carried out from early 2006 through mid-2007 before Internal Revenue Service criminal investigators discovered it. (cbonlin52010)
FORMER OWNER OF A MORTGAGE BROKERAGE EXPECTED TO PLEAD GUILTY TO MORTGAGE FRAUD
FACTS
On May 19, 2010 pleadings were filed in U.S. District Court charging Brian K. Bowling, former owner of Platinum Concepts, Inc., a now-defunct Madison, Wis., mortgage brokerage charging him with devising and taking part in a scheme from August 2005 to September 2008 for allegedly sending exaggerated and false information about loan applicants to banks and mortgage lenders. He is expected to plead guilty along with a former employee of the firm will also likely plead guilty to a charge of submitting a false loan application for a mortgage on his own home in Madison.
According to a charging document devised and took part in a scheme of sending loan applications to lenders that contained inflated income statements, exaggerated assets or understated liabilities, false employment information and misrepresentation of down payment funds, among other misleading information.
Bowling would get loan closing fees, mortgage brokerage fees and other benefits from lenders after the loans went through, the charging document states. In all, more than $1.73 million was loaned by mortgage lenders based on the false information, resulting in total losses to lenders of more than $434,000 after the sale of collateral, the document states.
Charged separately was Jason Khodadad, a former Platinum Concepts employee who allegedly filed false and misleading statements when seeking a mortgage from World Savings Bank. Bowling and Khodadad are both charged in federal court using a document called an information, which usually means that a plea agreement already has been worked out.
Khodadad is scheduled for a plea hearing on May 25 and Bowling is set for a plea hearing on May 28, both before U.S. District Judge Barbara Crabb.
Subsequently, charges in this case were brought against Joseph Bowman, Joshua Hughes and Richard Hurkman, all accused of conspiracy to submit a false loan application.
If convicted of wire fraud, Bowling faces a maximum penalty of 30 years in prison. If convicted of conspiracy to submit a false loan application, Khodadad, Bowman, Hughes, and Hurkman each face five years in prison.
Hughes and Bowman pleaded guilty on May 19, 2010, in U.S. District Court in Madison before Judge Barbara Crabb. Sentencing for Bowman is scheduled for July 22, 2010, at 1:20 p.m. Sentencing for Hughes is set for July 29, 2010, at 1:20 p.m. (wistjl51910)
MORAL
These mortgage task forces of the government are really working overtime. The number of fraud cases filed and the number of people charged in my humble opinion has increased tenfold over the last five years.
SALT LAKE CITY BROKER INDICTED ON 15 COUNTS FOR MORTGAGE FRAUD
FACTS
On May 19, 2010 a federal grand jury returned a 15-count indictment charging Joshua Lee Butcher of Salt Lake City, with bank fraud and false statements to a financial institution in what the indictment alleges was a scheme to get construction loans approved using false pretenses.
According to the indictment, Salt Lake Credit Union and Transwest Credit Union approved and funded construction loans relying on what they believed to be true and accurate borrower financial information which met their respective loan underwriting standards. The indictment alleges Butcher worked with both credit unions to broker loans for new home construction ranging from approximately $384,000 to $637,000. In meetings with borrowers Butcher was provided with accurate information about their income and assets. At times, borrowers also provided supporting documentation. Based on this information, the indictment alleges Butcher knew borrowers would not qualify for construction loans in the range they were seeking.
The indictment alleges that Butcher prepared and submitted false loan applications on behalf of the borrowers to the credit unions to induce approval and funding of construction loans under false pretenses.
The indictment alleges Butcher falsified loan applications by overstating borrowers' income and, at times, identifying assets which borrowers did not own. Additionally, construction loans offered by the financial institutions he was working with were intended to be used for homes occupied by borrowers as their primary residence as opposed to an investment intended to be resold at a profit shortly after the completion of construction, according to the indictment. Despite knowing some borrowers were not intending to use the home as a primary residence, Butcher falsified the application to show the property would be the borrower's primary residence. The indictment also alleges he provided false employment information for borrowers.
The indictment alleges eight counts of bank fraud and seven counts of false statements to a financial institution. The potential maximum penalty for each bank fraud count is 20 years in prison and a fine of $250,000. The potential maximum penalty for each false statement count is 30 years in prison and a fine of $1 million. (usattyut51910)
A REMINDER TO DIRECT ENDORSEMENT LENDERS ON HOW HUD/FHA CAN TERMINATE YOUR APPROVAL AND UNDERWRITING AUTHORITY
FACTS
This is a reminder on HUD's directive that it will use its regulatory authority to terminate a mortgagee's authorization to underwrite single-family loans in geographic areas where the lender has a high rate of earl defaults and claims. The reviews will be on DE defaults where the loans are 90 or more days delinquent) and claim rates on loans during the initial 24 months from the date of the commencement of amortization.
Every three months HUD will review the rate of defaults and claims on all FHA insured single-family loans analyzing the performance of every participating mortgagee in each geographic area served by a HUD field office.
If the default and claim rate for the preceding 24 months exceeds 200% with the geographic area served by the HUD field office and exceeds the national default and claim rate HUD will consider terminating the authority to do loans in that geographic area for the DE. This has already taken effect. Initially the rate was 300% for the period ending Dec. 31, 2009.
The next review is for the period ending June 30, 2010 and the default rate is for 250%. After that review the next will be for the period ending December 31, 2010 and the default rate will be 200% and remain there. Remember, the default and claim rate has to be exceeded and also the national default and claim rate has to be exceeded at the same time.
You as a direct endorsement lender will be notified prior to the termination. You will have exactly 30 days to appeal the termination. Failure to do so means you lose the approval for that geographic area and you have to wait six months before you can reapply for approval.
You can and should appeal by requesting an informal conference with the Deputy Assistant Secretary for Single Family Housing, or his or her designee prior to the termination date. The request must be in writing, submitted to the Docket Clerk, Department of Enforcement Center, Legal Division, Room B-133/VALA, U.S. Department of Housing and Urban Development, 451 7th Street, SW, Washington, D.C. 20410 within 30 calendar days of the date of receipt of the proposed termination notice. The informal conference may be oral or in writing of information and argument in opposition to the termination. I do not recommend trying to do this without an attorney. I have had people do it late and thereby lose the approval. I have seen them try it on their own and lose the approval. If done orally and I do not recommend this without a written presentation it can be in person in Washington or by telephone. If orally, it will be held within 60 days.
If no conference is requested then the termination will take effect 60 days from the date of the proposed termination notice without any further notice from HUD. (ml003)
MORAL
Do not ignore the letter or you will be out of the HUD program for that area.
A FURTHER REMINDER TO HUD/FHA DIRECT ENDORSEMENT LENDERS THAT INTEND TO USE THIRD PARTY NON-FHA ORIGINATORS
FACTS
A lender or mortgagee that accepts a loan application from a non-FHA-approved entity must confirm that the entity's legal name and Tax ID number are included in the FHA loan origination system record for the subject loan. The loan to be insured by FHA must be underwritten by the FHA-approved lender or mortgagee. (202.5a3)
A non-approved third-party originator may originate loans to be insured by FHA, provided:
(1) The third-party originator is working with and through an FHA-approved lender or mortgagee; and
(2) The third-party originator or an officer, partner, director, principal, manager, supervisor, loan processor, or loan originator of the third-party originator has not been subject to the sanctions or administrative actions listed in below as determined and verified by the FHA-approved lender or mortgagee.
Ineligibility. For a third party originator to be eligible no officer, partner, director, principal, manager, supervisor, loan processor, loan underwriter, or loan originator:
(1) Be suspended, debarred, under a limited denial of participation (LDP), or otherwise restricted under 2 CFR part 2424 or 24 CFR part 25, or under similar procedures of any other federal agency;
(2) Be indicted for, or have been convicted of, an offense that reflects adversely upon the integrity, competency, or fitness to meet the responsibilities of the lender or mortgagee;
(3) Be subject to unresolved findings as a result of HUD or other governmental audit, investigation, or review;
(4) Be engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility;
(5) Be convicted of, or have pled guilty or nolo contendere to, a felony related to participation in the real estate or mortgage loan industry:
(i) During the 7-year period preceding the date of the application for licensing and registration; or
(ii) 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;
(6) Be in violation of provisions of the Secure and Fair Enforcement (SAFE) Mortgage Licensing Act of 2008 (12 U.S.C. 5101 et seq.) or any applicable provision of state law; or
(7) Be in violation of any other requirement established by the Secretary (202.8b)
MORAL
In short, if you cannot work as an employee of the direct endorsement lender, then the TPO cannot have the same type of people working for it in order to submit loans to the direct endorsement lender.
IN CALIFORNIA BE CAREFUL HOW YOU LOAN MONEY
FACTS
Plaintiff David Hamad loaned Mohammid Daud Mojadidi $100,000 in 2005. There was a written secured promissory note with interest included. The money was to purchase property in Newport Beach, Calif. and it was to be repaid with interest upon sale of the property. The property was later sold and despite repeated demands plaintiff was not paid. Plaintiff sued claiming the loan was a personal loan to defendant and defendant claimed the loan was a partnership to buy the property and the partnership lost money and therefore nothing was owed to plaintiff. The case was mediated without success. At the mandatory settlement conference plaintiff offered to accept $60,000 and was rejected.
The Orange County Superior Court judge said that the defendant is to pay the plaintiff $100,000 plus 10% interest from July 16, 2008 to April 8, 2010 which would add about $17,500 to the judgment. The court found the testimony of the defendant replete with contradictions, inconsistencies and inaccuracies and rejected it entirely. (Hamad v. Mojadidi, 30-2008-0019311-CU-CO-CJC)
MORAL
This comes in the form of two questions. 1. If the note was secured why wasn't the plaintiff paid through escrow since the buyer could not get title insurance with the lien still in place? 2. Most form promissory notes provide for attorney fees and the opinion did not discuss a motion for attorney fees nor that attorney fees were awarded. This is considering there was a fourth amended complaint and that meant a lot of legal work. Lastly the defendant should have accepted the $60,000 demand and he would have been $57,500 richer presuming he has the money. Next time make sure there is a deed of trust. But remember if you are a junior lien that is purchase money you cannot get a deficiency in the event of foreclosure.
CALIFORNIA WOMAN PLEADS GUILTY TO MORTGAGE LOAN FRAUD
FACTS
On May 17, 2010, Mary Elaine Perkins, who owned Carlton Financial Enterprises Inc., Hermosa Beach California has pleaded guilty to a felony mail fraud charge related to a scheme in which she defrauded 90 investors of about $7 million. .
Perkins told investors that she would use their money to make short-term, high-interest loans to residential real estate owners who had difficulty obtaining financing. According to the plea agreement, Perkins promised to pay returns of 12% to 15% to her investors.
In some instances, she took investor money and did not make loans. In others, she foreclosed on borrowers' real estate and sold it to another company she owned--or to her family members--without repaying investors proceeds from the sale. Early investors received interest payments that came from later investors, federal prosecutors said.
Mail fraud carries a maximum possible sentence of 20 years in federal prison, but prosecutors are recommending a much lighter sentence because of Perkins's decision to plead guilty at an early stage. Sentencing is scheduled for Sept. 13, 2010. (lat52010)
CALIFORNIA LOAN OFFICER AND LAS VEGAS MAN PLEADS NOT GUILTY TO MORTGAGE FRAUD PROPERTY FLIPPING SCHEME
FACTS
On May 21, 2010 Eric Mortenson, a Sacramento, Calif. loan officer, pleaded not guilty to federal charges related to an alleged property flipping scheme. He is charged with wire fraud and conspiracy to commit wire fraud. He is accused with two others of causing lenders $2.7 million in losses while receiving lucrative commissions, Mortenson said he couldn't afford an attorney and was appointed a federal public defender. He was later released on a $50,000 bond.
His alleged accomplice Joel Clark of Las Vegas also was arrested the same day. Clark pleaded not guilty before a federal magistrate judge in Las Vegas.
Lawrence Davis of Las Vegas was still at large.
Mortenson was a loan officer with All State Home Loans. Davis was a real estate agent and Clark was his associate, records stated.
The three are accused of defrauding lenders by recruiting would-be investors to buy 13 capital-area houses at inflated prices ranging from $388,000 to $750,000. The deals occurred between July 2005 and March 2006. Without telling lenders after the loans were made, part of the excess purchase money was returned to borrowers, and to Clark, records state.
The three are alleged to have used fraudulent loan applications with phony incomes and jobs to qualify buyers who had previously been denied home loans. They told the buyers they could rent out the homes and "flip" them for profit, according to the charges. Eight lenders, including failed Washington Mutual and New Century Mortgage, made $6 million in loans on the properties, the indictments stated.
The 13 homes have since been foreclosed, authorities said. The buyers aren't being charged with wrongdoing. (sacrbe52210)
MORAL
The loan officer received all those heavy commissions and has no money left. Sounds typical to me.
FOUR INDICTED FOR FORECLOSURE RESCUE SCHEME
FACTS
A grand jury indicted three Shasta County residents and another from Texas for allegedly targeting distressed homeowners in phony foreclosure rescue efforts. Indicted and arrested on May 21, 2010 were Darrin Arthur Johnston, Todd Allen Smith and Cheryl Ann Hitomi. Jeremiah Andrew Martin of San Antonio, the fourth person, has not been arrested yet. All four are indicted on charges of mail fraud, conspiracy to commit mail fraud and money laundering.
The indictment says the four persuaded homeowners to sign over deeds to their homes with promises that they could rent and buy back the homes in two years. Instead, the four allegedly extracted equity from the homes by keeping rent payments and getting new loans on the homes. The homes were eventually foreclosed, costing lenders more than $1 million, federal authorities said. (sacrbe52210)
MARYLAND WOMAN PLEADS GUILTY TO MAKING FALSE STATEMENTS TO OBTAIN THREE HOME MORTGAGES WITHIN A THREE-MONTH PERIOD
FACTS
On May 21, 2010, Melva Massey pleaded guilty to conspiracy to commit wire fraud in connection with three fraudulent home mortgages. Between June 2007 and September 2007 Massey and her husband D'von Massey, along with others submitted three mortgage applications for three properties in Washington to different banks which falsely stated each property was to be the Masseys' primary residence; the Masseys had substantial rental income; another individual rented other property owned by the Masseys; and that individual had provided Melva Massey a cashier's check for a security deposit on the rental property. Melva Massey knew that banks reviewed income and assets to help determine whether to approve mortgage loans. The three banks approved the mortgage loans in the total amount of $1,205,267. Each of the three properties went into foreclosure or short sale, resulting in a total loss to the banks of $859,190.
Melva Massey faces a maximum sentence of 30 years in prison and a $1 million fine. U.S. District Judge Alexander Williams, Jr. scheduled her sentencing for Sept. 13, 2010 at 9:30 a.m.
D'von Massey pleaded guilty to the conspiracy on May 11, 2010 and is scheduled to be sentenced on Sept. 20, 2010 at 9:30. (usattymd52110)
MORAL
Did you notice the false statement of stating the homes would be her primary residence in all three cases? That was sufficient to convict her all by itself.
NEVADA AG OBTAINS CONVICTION FOR A FORECLOSURE RESCUE FRAUD
FACTS
On May 6, 2010, Nevada Attorney General Catherine Cortez Masto announced the sentencing of William Vargas in connection with his involvement with a mortgage foreclosure rescue company, Federal Housing Aid, whose operation included a call center in the Philippines.
District Court Judge Michael Villani sentenced Vargas to a year in the Clark County Detention Center, but suspended the sentence pursuant to a plea agreement. Vargas was allowed to enter a plea to a gross misdemeanor charge of attempted theft but was required to pay half of the restitution owed prior to sentencing. Vargas is required to pay total restitution of $21,000 to the victims of his crime.
Through Federal Housing Aid, Vargas would contact homeowners facing foreclosure and offer to stop the foreclosure proceeding and save their credit. The victims entered into an agreement to pay an up front fee ranging from $700 to $1,500 as compensation for effecting a solution to the foreclosure. Once these fees were forwarded to Federal Housing Aid, no further action was taken. The homeowners, some of whom were over the age of 60, were never provided with assistance in resolving their problems and, in fact, ended up losing their homes. (nvag5610)
TITLE AGENT, MORTGAGE BROKER, AND CONSTRUCTION BUSINESS OWNER CHARGED WITH $2.7 MILLION MORTGAGE FRAUD IN NEW JERSEY
FACTS
On May 17, 2010, three members of a mortgage fraud scheme, including a title agent and a mortgage broker, were arrested today on a criminal complaint charging them with conspiring to commit wire fraud. Special agents of the Federal Bureau of Investigation arrested Ania Nowak, Zbigniew Cichy and Kim Salvemini. The defendants are charged by complaint with conspiring to defraud various mortgage lenders of over $2.7 million by conducting at least five fraudulent real estate transactions involving two residential properties in New Jersey.
According to the complaint unsealed today in Newark federal court, Nowak owned a real estate title company, A.N. Title Agency LLC, and acted as the title and settlement agent at real estate closings. Nowak was responsible for, among other things: ensuring that the seller or the borrower in a refinancing transaction actually owned the home that was being used to secure a mortgage loan; paying off any prior mortgages before paying any money to the borrower; and recording certain mortgage documents with the county clerk. Instead of fulfilling these responsibilities in the five transactions described in the complaint, Nowak allegedly used her position to perpetrate the fraud along with her coconspirators.
From November 2005 to December 2007 Nowak and Cichy employed numerous fraudulent techniques--including allowing Cichy to apply and obtain a loan on a property he did not own, failing to pay off prior mortgages with new money lent by lenders, and failing to record mortgage documents with the county clerk. Nowak and Cichy also recruited Salvemini, a mortgage broker, to serve as a straw buyer to purportedly purchase a property that Cichy owned. The transaction was made so Salvemini could apply for fraudulent mortgage loans which Nowak and Cichy then stole. Cichy paid Salvemini approximately $17,500 for his role in the fraud as a straw buyer and in obtaining fraudulent loans.
In total, Nowak and Cichy spent over $1 million of the fraudulent loans they obtained to support Cichy's construction business and to pay for various personal expenses. Those expenses included a Mercedes Benz and other automobiles, multiple trips to Aruba, a trip to Poland, furniture, clothing, and purchases from QVC and the Home Shopping Network.
The wire fraud conspiracy count with which each of the defendants is charged carries a maximum potential penalty of 30 years in prison and a maximum $1 million fine. (usattynj51710)
MORAL
Note that the FBI went back five years and selling and buying property you do not own is easy to discover over time.
FAMOUS ULTRA MARATHON RUNNER ARRESTED FOR MORTGAGE FRAUD IN NORTH CAROLINA
FACTS
On May 20, 2010 federal agents arrested ultra-marathoner Charlie Engle on charges stemming from an alleged mortgage fraud scheme. The specific charges were not available.
The U.S. Attorney's Office in the Eastern District of Virginia said on May 21, 2010 in a news release that Engle is accused of making false statements on mortgage loan applications to purchase two properties in Cape Charles, Va. Engle allegedly inflated his income on the applications so that he could qualify for mortgages. The indictment also accuses Engle of submitting letters from friends falsely verifying his income and employment to qualify for the loans.
After completing the initial purchases, Engle allegedly was able to withdraw more than $140,000 in equity from the two properties through second mortgages and refinancing. The properties were foreclosed and the financial institutions lost more than $400,000, according to the news release.
Engle is a well-known name in ultra-endurance sports. In April, he released a new sports drink for ultra-endurance athletes through Cincinnati-based Infinit Nutrition. (news-rec.com52110)
MORAL
With that kind of fame and publicity, one wonders why he did it, if he did it. Remember, he is innocent until proven guilty in a court of law.
THREE INDICTED IN PENNSYLVANIA FOR MORTGAGE FRAUD CAUSING MORE THAN $7 MILLION IN LOSSES
FACTS
On May 20, 2010, an indictment was unsealed against Kirk H. Kirby, Sholonda Y. Johnson and Royal K. Williams charging each of them with three counts of wire fraud in connection with a real estate investment scheme that caused more than $7 million in losses to lenders. Kirby owned and operated Invictus Financial Group, located in Havertown, PA. Johnson was a loan officer at various mortgage brokerage companies. Williams was an accountant and the principal of R. Williams and Co. Public Accountants.
According to the indictment, between June 2006 and December 2007, Kirby recruited real estate investors to buy properties that his company had identified as suitable purchases. Kirby would then act as a dual agent, negotiating one price with the seller and a higher price for the buyer, taking the difference as his profit. Kirby also obtained financing for the investor through, among others, defendant Johnson, who brokered mortgage loans and who provided false documents to mortgage lenders. Defendant Williams would prepare some of those false documents, including phony verification letters, IRS Form W-2s, and pay stubs. Johnson was also obtaining multiple mortgages for some borrowers but not disclosing them to the lenders. Through their scheme, Kirby and Johnson obtained $7 million in fraudulent mortgage loans.
The indictment alleges that defendant Kirby promised investors that he would manage all aspects of the investment properties, including finding tenants, collecting rents, repairing and maintaining properties, and making mortgage payments. Kirby further promised that he would cover mortgage payments if the property was not rented or if rent payments did not cover the mortgage payments, he assured investors that he had obtained an insurance policy to cover their losses but he did not do so, and he promised to cover any losses on sales of investment properties. When defendant Kirby was unable to obtain tenants for the investment properties and could not make the required mortgage payments, the investors defaulted on the dozens of mortgages the defendants had obtained as part of the scheme. Contrary to Kirby's false claims, there was no insurance policy to cover the payments to the lenders. As a result of the scheme, the lenders lost more than $7 million.
If convicted, each of the accused faces an approximate sentence of 135 TO 168 months in jail under federal sentencing guidelines.
THREE MORE INDICTED FOR MORTGAGE FRAUD IN PENNSYLVANIA
FACTS
Frank J. Datillo, Michael Giello and Jason Megow were charged by indictment with two counts each of mail fraud, stemming from a scheme to defraud mortgage lenders in an effort to obtain money and property. Dattilo was the owner and operator of the mortgage brokerage firm Provident Financial Group, which was located in Bensalem, Pa. Dattilo employed Giello as a mortgage broker and loan officer and Megow as a loan processor.
Dattilo marketed to people with poor credit or low incomes. According to the indictment, between January 2004 and February 2007, the defendants created false documents for use in mortgages application. The falsified forms, among other things, overstated borrowers' income, falsely showed that borrowers had rental histories, and showed that a property was an income producing rental property when, in fact, it was not. These fraudulent documents made borrowers appear creditworthier than they were, thereby misleading the banks into funding the mortgage loans.
The indictment further alleges that, to enrich himself, Dattilo would present borrowers with a settlement sheet that included unexpected costs and fees. He then offered to cover closing costs by having the borrowers sign a second mortgage that they would owe to Dattilo and which was concealed from the lenders (also criminal fraud since changes liability risk on first trust deed holder). This second mortgage resulted in a lien on the property in defendant Dattilo's name. Several borrowers did not have enough income to cover both mortgages and defaulted on their loans, resulting in foreclosures.
If convicted, each defendant faces a maximum possible statutory sentence of 40 years in prison, a fine of up to $500,000, restitution, and three years' supervised release. (usattmdpa)
MORAL
Notice how the government went back six years to indict in the second case? Like I said, the government is out to get mortgage fraud with a vengeance. If you have been involved see an attorney now before a government agent sees you later. At this stage the attorney can give you better help then he can after you are caught. Remember innocent until proven guilty in a court of law.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
