FHA WAIVES THE 90-DAY RESALE RULE SUCH THAT PROPERTIES MAY BE RESOLD WITHIN 90-DAYS OF THE ORIGINAL PURCHASE
FACTS
FHA has waived its regulation that prohibits the use of FHA financing to purchase properties that are being resold within 90 days of the previous acquisition. During this period of high foreclosures, FHA seeks to encourage investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes with the objective of increasing the availability of affordable homes for first- time and other purchasers and helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high. While the waiver is granted for the purpose of stimulating rehabilitation of foreclosed and abandoned homes, the waiver is applicable to all properties being resold within the 90-day period after prior acquisition, and is not limited to foreclosed properties.
The waiver, however, has conditions, and eligible mortgages must meet the conditions specified in this notice. Additionally, the waiver is not applicable to mortgages insured under HUD's Home Equity Conversion Mortgage program. (75fr28632)
MORAL
Sounds like an investor's right to work law to me. But read the regulation in full first so you are not sorry afterward.
ALABAMA WOMAN INDICTED OVER $69,000 LOAN
FACTS
On May 25, 2010 a federal grand jury indicted Charlene Andrews, a Birmingham woman, for one count of mail fraud in connection to her application for a mortgage loan to buy a house.
According to the indictment Andrews applied for a mortgage loan in March 2007, causing the application and supporting documents to be mailed to NorthStar Mortgage Co. In each of those documents, Andrews falsely claimed that she received monthly Social Security disability benefits. Had Andrews accurately reported her income, she would not have been eligible to receive the mortgage loan.
The indictment also seeks forfeiture of $69,500, the amount of the fraudulently obtained loan. The maximum sentence for mail fraud is 20 years in prison and a $1 million fine.
Special agents of the FBI, the Department of Housing and Urban Development, Office of the Inspector General, and the Social Security Administration, Office of the Inspector General, worked this case. Assistant U.S. Attorney Patrick Carney is prosecuting it. (usattyndal52510)
MORAL
I would ask you to note that the federal people are now chasing loans in the low area and $69,500 is pretty low and they are chasing the ones submitted to mortgage companies as opposed to just banks, savings & loans and credit unions. The woman must also pay restitution. This tells you at least one thing. The Nationwide Mortgage Fraud Task Force is now large enough to chase the smaller loans and that means more people are going to be looking at the "slammer" unless they have a good attorney.
CALIFORNIA SON AND MOTHER INDICTED FOR HARD MONEY INVESTMENT LOAN FRAUD
FACTS
On May 27, 2010, a federal grand jury returned a six-count indictment charging Robert E. Rosenau and his mother, Donna M. Rosenau, of Redding, Calif., with mail fraud and a conspiracy to commit mail fraud in a fraudulent investment scheme.
The indictment alleges the pair, through their family business, Rosenau Investments Inc., took in more than $700,000 in investment funds between December 2007 and February 2008 with promises that they would be used to fund "hard money" real estate loans. The indictment alleges that those funds instead were used to pay monthly returns to investors in January and February 2008 (approximately $163,000 in each of those months), and used to issue checks totaling more than $180,000 for the benefit of Robert E. Rosenau or his associates.
The maximum statutory penalty for the conspiracy charge is five years in prison, and the maximum statutory penalty for the mail fraud charge is 20 years in prison. Each charge carries a maximum fine of $250,000. (usattyedca52710)
MORAL
When you give money to a hard money investor to loan it should be for a specific loan and spelled out on the disclosure statement the broker is required to give you at the time of requesting the money. Then check the endorsement on the back of the check when it is returned to you from the bank to be certain it shows that it was deposited into the broker trust account. Failing these to be true you should consult your attorney.
COLORADO NEW LAW ON THIRD-PARTY FEE DISCLOSURES
FACTS
The Colorado Division of Real Estate has adopted a new rule that requires a separate disclosure to each borrower that itemizes all third-party fees and costs to comply with the provisions of Colo. Rev. Stat. Ann. § 12-61-914(2)(b). According to Section 12-61-914(2)(b), a mortgage loan originator must provide the borrower a written disclosure that contains the following information: The itemized costs of any credit report, appraisal, title report, title insurance policy, mortgage insurance, escrow fee, property tax, insurance, structural or pest inspection, and any other third-party provider's costs associated with the residential mortgage loan. (docmgic52410)
MORAL
If you do loans in Colorado be certain to use the new disclosure or be certain to be disciplined if you do not in addition to increasing the risk of being sued.
COLORADO MAN GETS OVER TWO YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On April 16, 2010, Stafford A. Hilaire of Aurora, Col., was sentenced to 32 months in prison on charges of conspiracy to defraud the United States and conspiracy to commit money laundering. In addition to the prison term, Hilaire was ordered to spend two years on supervised release and to pay more than $397,000 in restitution.
Hilaire was the last of 35 cases stemming from a mortgage fraud ring. The multi-million-dollar mortgage fraud ring included real estate agents, mortgage brokers and homebuyers.
Of the 35 people prosecuted, 31 either pled guilty or were convicted at trial. Of those, seven received prison time, and 23 received probation, and one received only a fine. The cases against three were dismissed and one defendant was acquitted at trial.
Hilaire was a loan officer and president of Catalina Century Mortgage. From February 1999 to July 2004 he was part of a scheme that falsified information in loan applications. The falsified documents were submitted to mortgage companies and to federal housing authorities to obtain mortgage loans and mortgage insurance probably making these FHA insured loans. (aurorasent51010)
MORAL
Notice there were 35 indicted, three dismissed, one acquitted at trail. I would say that most of them had very good attorneys considering 23 did no time in federal prison, one receives only a fine, and three got dismissed and one got acquitted at trial. My memory wants to say this is the first acquittal I have seen in years on mortgage fraud charges.
EMPHASIS ON MORTGAGE FRAUD
I would like to emphasis that the few mortgage frauds listed in these e-alerts are just that "very few" or a "drop in the bucket." For every one I list there are at least 20 other indictments in various states that I have chosen not to list because of the space constrictions. I literally do not have the space to list them all.
Law enforcement has placed great emphasis on mortgage fraud and is going back 10 years to indict those involved. Almost without exception I read at least 20 additional cases every week aside from the ones listed here. So as I have repeatedly stated, if anyone reading this has been involved in questionable loans in the last 10 years I highly recommend you see your attorney now before federal or state agents see you later.
FLORIDA REQUIRES LOAN PROCESSORS TO BE LICENSED AS WELL AS LOAN ORIGINATORS
FACTS
Effective Oct. 1, 2010, Florida has a new employment definition for licensed loan originators acting solely as a loan processors. All loan processors will be required to have a license. (alrgs52810)
MORAL
Keep up with the changes. Be a member of your mortgage professional organization and the organization should keep you current on the law and the changes. Otherwise, you may find yourself in serious trouble. Especially, considering the current climate on mortgage brokers.
NEW YORK MAN PLEADS GUILTY TO MORTGAGE FRAUD IN FLORIDA
FACTS
On May 25, 2010, Peter Hartofilis, of Flushing, N.Y., pled guilty before U. S. District Judge Donald M. Middlebrooks to conspiracy to commit mail and wire fraud along with a count of mail fraud. Sentencing has been scheduled for Aug. 16, 2010 at 10:30 am.
From January 2006 through October 2007, Hartofilis and co-defendant Jason Vitulano were branch managers of the Boca Raton, Fla., office of TopDot Mortgage. Loan applications contained grossly inflated statements of the applicants' earnings and assets on deposit in a local bank. In addition Joseph Miller, an attorney, acted as closing agent and title agent on a number of these loan transactions. Miller agreed to divert loan proceeds to the personal accounts of Vitulano, Hartofilis and others without disclosing that fact to the mortgage lenders.
The four other defendants in the case have pled guilty and are currently awaiting sentencing. Defendant Robert Hofler, vice president at First Southern Bank, Boca Raton, pled guilty to the conspiracy charge on April 8, 2010. Hofler used his position to falsify verification of deposit forms that were used to deceive lenders into believing that a prospective loan applicants had large balances on deposit at First Southern, which was not true. In reliance on these and other false statements in the loan applications, the lenders approved and funded more than $5 million in mortgage loans to purchase residences in Palm Beach and Broward Counties. Hofler is scheduled for sentencing on July 27, 2010 at 10:30 am.
Defendant Steve Vento purchased two properties, each valued at the time at over $1 million, by submitting false loan applications through Top Dot mortgage, through the work Vitulano. Vento is scheduled for sentencing on July 13, 2010 at 11:00 am.
Vitulano, the other Top Dot Mortgage branch manager and alleged leader of the conspiracy scheme, is scheduled to be sentenced on July 19, 2010 at 10:30 am. Miller is scheduled to be sentenced on, August 9, 2010 at 10:30 am.
At sentencing, each of the defendants faces a maximum statutory term of imprisonment of up to 30 years in prison on each of the counts against them. (usattysdfl52610)
MORAL
I do not now, nor have I ever understood why people do such obvious things that leave such a large paper trail that leads right to them. They create shame for their families and children and heartbreak for their parents.
GEORGIA COUPLE PLEAD GUILTY TO MORTGAGE FRAUD
FACTS
On May 11, 2010, Brian Steptoe and his wife Natasha, both from Emanuel County, Ga., pleaded guilty in federal district court to bank fraud and conspiracy to commit bank fraud, respectively. Evidence presented during their guilty pleas revealed that the Steptoes, with the assistance of others, knowingly submitted a false loan application and other documentation to Bank of America with regard to a $400,000 home loan. The investigation revealed that the Steptoes' scheme was to defraud Bank of America in order to pocket sizeable sums of money for themselves and others. The property went into foreclosure soon after it was sold.
Brian Steptoe faces a maximum penalty of 30 years imprisonment, a $1,000,000 fine and five years of supervised release. He is currently incarcerated and awaits sentencing.
Natasha Steptoe faces a maximum penalty of five years imprisonment, a $250,000 fine, and three years of supervised release. She remains on bond pending her sentencing hearing, which has not yet been scheduled. (usattsdga51110)
MORAL
I suppose that is one way to get legal separation. But it seems to me divorce would be a lot easier
LOUISIANA REAL ESTATE INVESTOR PLEADS GUILTY
FACTS
On May 26, 2010 Michael B. Smuck, age 61, of Metairie, La., pled guilty in federal court in front of U.S. District Judge Lance N. Africk to mail fraud.
Smuck owned and operated MBS Realty Investors Ltd. and MBS Management Services Inc. located at One Galleria Blvd, Suite 1950, Metairie, La. One of the real estate investment partnerships operated by Smuck, MBS Realty Investors Ltd. and MBS Management Services Inc. was called MBS-Briar Meadows Ltd., which owned an apartment community in Houston. Beginning on or about May 30, 2007 and continuing until on or about Sept. 29, 2007, Smuck devised a scheme to defraud in order to obtain approximately $3,477,980.00 in investor property to pay company debts unrelated to the Briar Meadows partnership.
Smuck sold the property known as Briar Meadows and misappropriated the funds from the sale to pay other company debts rather than disburse those sale proceeds to the investors of Briar Meadows. Smuck continued to send documentation to investors in Briar Meadows in order to give the fictitious appearance that the investment property was still active.
Smuck faces a term of imprisonment of 30 months and a $250,000 fine. In an effort to make the victims of this crime whole, the United States has secured from the defendant an agreement to pay a minimum of $3,299,480 in restitution to investors in both Briar Meadows and Yellowstone Ranch, which are apartment communities in Houston. Sentencing is set for Sept. 2, 2010 at 2:00 p.m. (usattyedla52610)
MORAL
Don't steal. You just might get caught.
PAIR PLEAD GUILTY TO MORTGAGE FRAUD IN MISSOURI
FACTS
On May 21, 2010 and May 20, 2010 respectively Cynthia D. Jordan and Anahit Nshanian pleaded guilty in federal court to charges related to mortgage fraud schemes including property flipping involving a $12.6 million conspiracy that involved 25 upscale residential properties. All 18 defendants in this case have pleaded guilty to the charges.
Jordan obtained mortgage loans to purchase the properties by submitting fraudulent documentation and making false representations. Jordan falsely represented that she would occupy the homes as her primary residence. As a result of the scheme, Jordan obtained money from the loan proceeds and directed loan proceeds be paid to others under the guise of false invoices and other false documents.
As part of the scheme, Jordan purchased a Kansas City property for $355,000. At the time she entered the contract, she and co-conspirators planned to sell the property before a mortgage payment was due so that she did not have to make a loan payment. Jordan signed a contract to sell the property for $555,000 five days later, for which she received $17,500. Two co-conspirators, as a result of submitting fraudulent invoices, received a total of $172,974.
Jordan also purchased another Kansas City property for $537,000 that she agreed to sell within six days of her purchase for $775,000. Jordan received $17,173 and two co-conspirators, as a result of submitting fraudulent invoices, received a total of $193,000.
The government and Jordan agree that the sentence should not exceed nine years without parole.
Nshanian admitted that she was involved in a scheme to buy and sell new homes--all of which were built by Jerry R. Emerick. Buyers purchased the homes at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then kept the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from Emerick, with kickbacks of up to $125,000 on each house. Emerick pleaded guilty to his role in the conspiracy and awaits sentencing.
Mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders' knowledge. Nshanian received approximately $148,614 in kickbacks.
Nshanian purchased two properties in Lee's Summit as part of the conspiracy. In obtaining mortgage loans, Nshanian made material misrepresentations upon which the lenders relied. Nshanian also admitted that she received money back unbeknownst to the lenders.
Nshanian received a $510,000 loan for one property; after closing, she received an $89,307 kickback, of which co-defendant Jerome Shade Howard received $20,693. Nshanian received a $657,500 loan for another property; after closing, she received an $80,000 kickback and Howard received $25,000.
Under federal statutes, Nshanian is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. (usattywdmo52410)
MORAL
Notice Cynthia D. Jordan gets no more than nine years in federal prison but seems to have gotten the least amount of money from the scheme. I guess the old proverb "crime does not pay" is somewhat apropos here.
FIVE PEOPLE IN LAS VEGAS CHARGED WITH
MORTGAGE FRAUD
FACTS
On May 26, 2010, Lloyd H. Gardley, Candis Gardley, Suzanne McAllister, Arcell Mitchell Jr., and Sharon Wagner, were indicted by a Las Vegas Federal Grand Jury charged with conspiracy to commit bank fraud, mail fraud, and wire fraud, six counts of bank fraud, and criminal forfeiture.
Arrest warrants have been issued for the Gardleys and Mitchell. Lloyd Gardley was president, director, secretary and resident agent of Prolific Management Inc., a Nevada corporation, and registered agent of Avante Conquest LLC, a Nevada limited liability company. Lloyd and Candis Gardley were managing members of Excel Consulting LLC, a Nevada limited liability company. Candis Gardley was president and resident agent of Oakhill Management Inc., a Nevada corporation. McAllister was an assistant escrow officer and notary at Lawyers Title. Mitchell worked as a loan officer for Valley Mortgage Group. Wagner was a realtor for Coldwell Banker Wardley.
The indictment alleges that from about 2005 to April 2007, the defendants devised a mortgage fraud scheme which involved the use of straw buyers and the submission of false information to financial institutions in order to obtain mortgage loans. The defendants solicited persons to act as straw buyers to purchase real estate, and in some instances, the defendants had the straw buyers purchase multiple houses at or about the same time. The defendants caused to be submitted to the financial institutions mortgage loan applications containing fraudulent information about the straw buyers' employment, income, assets, liabilities, rental history, value of the property, intent to occupy the homes, Social Security number, and source of earnest money deposits and costs. The indictment lists 28 real property sales transactions involving 21 homes sold in Las Vegas between August 25, 2005, and April 18, 2007. Seven of the homes were flipped or sold twice within short periods of time. The majority of the homes sold for more than $700,000, and the total value of the mortgages for the 28 transactions was $18.9 million.
If convicted, the defendants face up to 30 years in prison and a $1,000,000 fine on each count, and may be required to forfeit up to approximately $4.2 million.
This investigation is being led by the U.S. Postal Inspection Service and other agencies of the Southern Nevada Mortgage Fraud Task Force, including the FBI, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Secret Service, the Las Vegas Metropolitan Police Department, and Office of the Inspector General for the Social Security Administration. Assistant United States Attorney Brian Pugh is prosecuting the case. (usattynv52610)
FORMER OHIO ATTORNEY DRAWS FIVE MONTHS IN A FEDERAL PRISON AND A FELONY CONVICTION FOR REFINANCE ON HIS OWN HOME AND NO OTHER LOANS
FACTS
On May 21, 2010, U.S. District Chief Judge James G. Carr sentenced Jason E. Schwartz, of North Baltimore, Ohio, to five months in the custody of the Bureau of Prisons, followed by three years of supervised release. Schwartz was also ordered to pay restitution in the amount of $131,500.00 to The Huntington National Bank and $200.00 in special assessments to the Crime Victims' Fund.
On April 2, 2009, a federal grand jury in Toledo, Ohio, returned an indictment charging Schwartz with making a false statement on a loan application. On Dec. 23, 2009, Schwartz pleaded guilty to making a false statement on a loan application.
On or about May 2002, Schwartz, knowingly made a material false statement for the purpose of influencing the action of The Huntington National, an institution with deposits insured by the Federal Deposit Insurance Corporation, in connection with a loan, extension, renewal, and deferment of the same loan, in that Schwartz obtained a loan in the amount of $272,000, of which $172,000 was to pay off an existing loan with the bank, and the remaining $100,000 was to be used for the building of a barn, when in fact Schwartz did not intend to use the proceeds to build a barn. (usattyndoh52110)
MORAL
I emphasize this one for three reasons. One is the loan was on his old property. Two he did not use the proceeds for the reason he said he would. Three, the act took place eight years ago. The moral: The FBI and government are getting ever tougher as I have said and are now looking at the smaller players who take loans out on their own property, use over three-fifths to pay off an existing loan with the same lender and then do not use the remainder to build a barn. Watch it! If you have a "problem loan" see your lawyer now before the government sees you later. There are legal ways to cure the problem.
TWO ATTORNEYS IN TWO DIFFERENT CASES IN PENNSYLVANIA PLEAD GUILTY AND ONE IS SENTENCED FOR MORTGAGE FRAUD
FACTS
On May 27, 2010, Daniel Sporrer, a resident of Pittsburgh, pleaded guilty in federal court in Pittsburgh to a charge of wire fraud conspiracy on connection with a mortgage fraud scheme before United States District Judge Nora Barry Fischer.
Sporrer participated in a mortgage fraud scheme with Robert Arakelian, who was a mortgage broker associated with Pittsburgh Home Loan and Karen Atkison, who was a closing agent who worked with Sporrer and others. Arakelian submitted false loan applications to lenders that falsely reported that the borrowers had sufficient funds in their own accounts to make the down payments associated with the purchases of real estate and to otherwise qualify for the loans to finance the purchases of the real estate. The closing documents, which were prepared and executed by Sporrer and Atkison, falsely reported to the lenders that the borrowers made down payments from their own funds at the closings, when, in fact, they did not make any payments at the closings. In addition, Sporrer advanced money to Arakelian in advance of the closings so that Arakelian could purchase certified checks, copies of which were made to present to the lenders to falsely verify that the borrowers had made the down payments.
Judge Fischer scheduled sentencing for Oct. 29, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.
On May 25, 2010, Robert Danenberg of Pittsburgh was sentenced to two years of incarceration and three years of supervised release on his conviction of wire fraud conspiracy in connection with a different mortgage fraud scheme.
Danenberg is an attorney who specialized in closing real estate transactions. He participated in a mortgage fraud conspiracy in which a co-conspirator recruited buyers to purchase properties at fraudulently elevated prices and financed through fraudulently obtained loans. Danenberg's role in the conspiracy was to close the fraudulent loans, and the closings themselves were fraudulent in two ways. First, the closings required the borrowers to bring certified funds to the closings from their own funds to make the down payments associated with the purchase. The borrowers, however, did not have sufficient funds to make the down payments and were often getting cash back at the closings. The down payments were paid by the sellers, the mortgage broker, and on several occasions, by Danenberg himself. The closings were also fraudulent in that the settlement statements reflected payments to contractors for work purportedly already done on the properties serving as collateral for the loans. In fact, however, as Danenberg well knew, those payments were kickbacks to participants in the conspiracy.
In total, Danenberg closed approximately 70 fraudulent loans totaling in excess of $5,000,000 of loan proceeds. Danenberg pleaded guilty after four days of trial. (USATTYWDPA52810)
MORAL
It always amazes me after spending four years in undergraduate school, three years in law school, 3 days of taking a bar exam to get a license and then to lose it all and bring embarrassment to family and friends.
VERMONT REQUIRES NEW DISCLOSURES TO CONSUMERS WHEN TRIGGER LEADS ARE USED
FACTS
Effective July 1, 2010 Vermont requires consumer disclosure requirements when trigger lead solicitations are used. (alrgs52510)
MORAL
Use the disclosure if you use trigger leads or you may find yourself using an attorney to keep your license for failure to give the disclosure.
VIRGINIA BUSINESSMAN DRAWS FIVE YEARS IN FEDERAL PENITENTIARY FOR MORTGAGE FRAUD
FACTS
On May 24, 2010, Robert S. Capehart was sentenced to five years in prison on one count of mail fraud, and ordered him to pay $1,967,074 in restitution. Capehart was the president of two Virginia companies, Retirement Investment Group and BYB Investments. Through these companies, he promoted real estate ventures, including a convenience store and multiple pieces of real estate that he purchased for rental and investment purposes. Capehart admitted to falsifying mortgage applications, check kiting and defrauding 22 investors in a Ponzi scheme.
From 2003 until 2006, Capehart purchased approximately 40 rental properties with little or no down payment and a large mortgage-backed loan. In obtaining the loans he did not fully disclose all of his real estate loan liabilities and other real estate holdings. He would obtain new appraisals and refinance the properties based on the appreciated value of the properties without disclosing all of his liabilities and real estate holdings. After paying off the original loan, Capehart would then use the excess funds for business and personal purposes. The losses were approximately $252,000.
He turned to private investors whom he solicited with a promissory note program carrying high interest rates, such as 20 percent over three months, equating to an annual rate of 80%. He represented that he would be able to pay such high rates of interest because he was investing in a variety of properties, such as the Sans Souci Hotel and Apartment Complex in Buckroe Beach, Va., a beach house in Kure Beach, N.C., a convenience store in Richmond, Va., and various other properties in Newport News and Hampton, Va.
Capehart solicited money from approximately 22 potential investors and induced them to invest approximately $2.053 million by making materially false, fraudulent and misleading representations. Capehart's program was a Ponzi scheme, in which early investors are paid with the contribution of later investors rather than the profit from an underlying business activity. Capehart also lulled investors into believing that their "investment" funds would be safe and secure. To prevent the discovery of the true use of investors' funds and forestall legal action by investors, Capehart encouraged investors not to seek the immediate return of funds but to "roll over" their investments and thereby purportedly earn even greater profits.
In late 2006 and early 2007, in order to continue to buy time, Capehart began kiting hundreds of thousands of dollars of checks between First Market Bank, Village Bank and First Capital Bank. (usattyedva52410)
MORAL
Guess he got caught up with his own enthusiasm for real estate inflation. Now he has five years to cool that enthusiasm.
WISCONSIN MORE THAN DOUBLES RECORDING FEES
FACTS
Effective June 25, 2010 the cost to record a real estate document in a county Register of Deeds office will be $30 regardless of the number of pages.
MORAL
Update your RESPA Good Faith Estimates and HUD-1's accordingly or you can be stuck for the access if you bill too low.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
