RESPA CAN BE VIOLATED EVEN WHEN THERE IS NO OVERCHARGE ON REFERRALS
FACTS
Plaintiff Edwards, a resident of Ohio, in a class action sued defendants The First American Corp. and First American Title Insurance Co. The complaint alleged violation of the Real Estate Settlement Procedures Act. It alleged that First American improperly paid millions of dollars to individual title companies in exchange for the title companies entering into exclusive referral agreements with First American. Plaintiff asserts that in exchange for First American's purchase of a minority interest in many of these title agencies, the title agencies entered into an "exclusive" agency agreement with each of them that were completely exclusive and that these agreements are actually exclusive and illegal under the ant-kickback provisions of RESPA.
Plaintiff alleges she was affected by one of these exclusive agency agreements between First American and Tower City. In 1998, First American paid Tower City $2 million in cash and securities and in exchange First American received a 17.5% minority interest in Tower City. Tower City then entered into a "Captive Title Insurance Agreement" that required it to refer all future title insurance business "exclusively" to First American Title. Tower City did have agreements with and regularly referred business to at least three other title companies prior to 1998 but then exclusively sent all the business to First American after they entered into the Captive Title Insurance Agreement.
Plaintiff had purchased a home in Cleveland in 2007 and Tower City was the settlement agent and conducted the closing in Ohio. Plaintiff received her HUD-1 showing that she would pay $455.43 and the seller would pay $272.41 for title insurance. Plaintiff claims this violated RESPA notwithstanding Ohio controlled the price of title insurance and all title companies had to charge the same price for insurance. Notwithstanding there was no overcharge Plaintiff alleged this violated the RESPA anti-kickback law. Defendants alleged there is no injury to plaintiff because state law controls these fees and there was no overcharge and therefore no kickback.
Defendants First American moved to dismiss the complaint for lack of standing to sue because plaintiff was not injured because there was no overcharge for the insurance because Ohio state law controlled all the fees. This motion was denied and First American appealed.
The 9th Circuit Court of Appeals said affirmed. RESPA prohibits the payment of "any fee, kickback, or thing of value" in exchange for business referrals and also forbids that a "portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service" be paid for services not actually rendered to the customer. Whenever there is a violation plaintiff can receive an amount equal to three times the amount of any charge paid for the settlement service.
Since a violation occurs when any charge is paid for the referral, there is no restriction to a particular type of charge, such as an overcharge. The term "overcharge" does not appear anywhere in the statute. Because the term overcharge does not exist anywhere in the statute any charge paid for the referral of business including the statutory charges allowed by the state for the exclusive referral the plaintiff is injured. The advice given by a title company in this exclusive arrangement may lose its impartiality and may not be based on the professional evaluation of the quality of the service provided if the referrer has a financial interest in the company being recommended.
Thus a plaintiff has standing to sue a settlement service provider under RESPA, even if that plaintiff was not overcharged for settlement services. (Edwards vs. The First American Corporation, et al. 08-56536, 08-56538, 6-21-10)
MORAL
If any settlement service provider is paid for a referral as a referral, even if no overcharge there is a RESPA violation and the payor will pay the plaintiff. Read RESPA VERY CAREFULLY before you ask for the referral. Question: If you a mortgage broker YSP in exchange for the referral is it a RESPA violation and does the lender have to pay?
RESPA DOES NOT ALLOW REFERRAL FEES TO BE PAID TO REAL ESTATE BROKERS FOR REFERRING HOME WARRANTY COMPANIES
FACTS
RESPA does not prohibit a real estate broker or agent from referring business to a home warranty company. Rather, RESPA PROHIBITS A REAL ESTATE BROKER OR AGENT FROM RECEIVING A FEE FOR SUCH A REFERRAL, AS A REFERRAL IS NOT A COMPENSABLE SERVICE.
Accordingly, HUD interprets section 8 of RESPA and HUD's regulations as these authorities apply to the compensation provided by home warranty companies to real estate brokers and agents as follows:
(1) A payment by an HWC for marketing services performed by real estate brokers or agents on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under section 8;
(2) Depending upon the facts of a particular case, an HWC may compensate a real estate broker or agent for services when those services are actual, necessary and distinct from the primary services provided by the real estate broker or agent, and when those additional services are not nominal and are not services for which there is a duplicative charge; and
(3) The amount of compensation from the HWC that is permitted under section 8 for such additional services must be reasonably related to the value of those services and not include compensation for referrals of business.
(75 fr 36271, 6-25-10)
MORAL
Before you do it, consult with your attorney. It is better to get a legal opinion and pay for the few hours it takes than to pay for the defense of a Mortgagee Review Board hearing and potential penalty.
FBI, IRS AND STATE BAR OF CALIFORNIA RAID LOAN MOD FIRM
FACTS
On June 23, agents with the FBI, the Internal Revenue Service and the State Bar of California served search warrants at two related Oceanside loan modification businesses.
The raids took place at the FIRST AMERICAN LAW CENTER, 615 Mission Ave. in downtown Oceanside, and the LEAD SOURCE, 2101 El Camino Real. Agents at the First American Law Center would not comment except to say a search warrant had been served.
DEAN CHANDLER, president of the First American Law Center, said he was in Arizona when his office was raided. He said agents had not contacted him, and he was not sure why his business was being investigated. "We run a very clean shop," Chandler said during a telephone interview. He said his year-old business places national ads offering to help troubled homeowners modify their loans.
Of about 2,000 people who have contacted the firm for help getting their monthly housing payments reduced, the firm has succeeded in helping 500, he said. However, numerous Internet consumer review sites contain allegations from unhappy customers that the business is a "scam," pocketing an advanced fee, and then failing to return calls or help with loan modifications.
Chandler said those allegations were false. He said the company has a money-back guarantee on its $3,495 loan modification service, and it has returned more than $1 million since opening in April 2009. The company keeps a $600 processing fee in every exchange, whether or not a loan can be modified, he said. The company recently stopped asking for payment upfront in California, because of a new law that bars the practice, he said. Chandler is an attorney who was admitted to the California Bar in 1992, according to the California State Bar's website. He has never had any action against his license, according to the site.
Lead Source is allegedly a call center owned by a man named GARY BOBEL that helps respond to the First American Law Center's national ads. The Lead Source website says it has produced ads for loan modification services, including some for First American. (nocotms62410)
FIFTH PERSON PLEADS GUILTY IN CRISP, COLE MORTGAGE FRAUD
FACTS
On June 22, CHRISTOPHER LANCE STOVALL, former loan officer with the lending arm of Crisp, Cole & Associates, Tower Lending, reached a plea agreement with authorities in a mortgage fraud case that prosecutors say cost lenders nearly $2.5 million. He knowingly submitted false information in mortgage loan applications for two Bakersfield homes, according to documents filed in federal court. Loans on both homes later defaulted and the properties were sold again for far less.
Stovall was charged with four counts of mail fraud, as well as aiding and abetting. Stovall would have to pay restitution, and each count potentially carries a prison sentence of up to 30 years and/or a $1 million fine. If Stovall makes good on his commitment to cooperate with authorities in the ongoing federal investigation of now defunct real estate firm Crisp & Cole, he could receive a lighter punishment.
The homes at issue in the case are single-family residences at 8702 Oak Hills Ave. and 11504 Haydock Court purchased in 2005 and 2006. The homes were purchased using straw buyers who lied on their mortgage loan applications, then resold at a higher price for profit, according to the court documents.
The two principals of that firm, David Crisp and Carl Cole, lost their real estate licenses in 2008. Since then, three of Crisp's in-laws--KEVIN AND LESLIE SLUGA AND MEGAN BALOD--and former employee JERALD TEIXEIRA have accepted plea deals for felony wire fraud and aiding and abetting. Federal prosecutors have not filed criminal charges against Crisp or Cole, but both face civil litigation from lenders.
At least 88 foreclosed properties are linked to former Crisp & Cole agency employees, family members and associates. (bkrsfldcal62310)
MORAL
Lawyer did a good job it seems.
GENNARO RAUSO OF NEW JERSEY CHARGED IN PENNSYLVANIA WITH MORTGAGE FRAUD
FACTS
On June 24, GENNARO RAUSO, who owned and operated a real estate management company that purported to help financially distressed homeowners with their foreclosure problems, was charged by information with several mortgage fraud related offenses. The information alleges that as part of his scheme, Rauso took advantage of desperate homeowners with the promise of staying in, or saving, their homes, when in fact, he was using them to defraud the mortgage holders.
According to the information, between January 2005 and December 2008, Rauso owned and operated a real estate management company, D&B PROPERTY INVESTORS, to carry out a scheme to defraud mortgage companies out of hundreds of thousands of dollars in mortgage payments. Rauso sought out homeowners who were facing immediate foreclosure on their homes and offered to help them avoid foreclosure. In a flyer mailed to these homeowners, Rauso claimed that he could help homeowners fight the mortgage companies on their behalf, while at the same time helping them to rebuild their credit so they could keep their home. Rauso also boasted that even if their home were lost to foreclosure, he could still keep them in their home for an additional 12-18 months after the sheriff's sale.
Once a homeowner agreed to participate, Rauso had the homeowner transfer the title of the home over to him for a nominal sum. Rauso then had the homeowner sign a lease, making the homeowner a tenant who paid rent to Rauso. He then delayed and obstructed the foreclosure process by, among other things, filing federal bankruptcy petitions. During this time when foreclosure was delayed, Rauso collected monthly rent payments from the homeowners, but made no payments to the mortgage companies. Ultimately, Rauso used more than 200 homeowners and their properties in his scheme to defraud mortgage companies, resulting in Rauso pocketing at least $400,000 in diverted or lost mortgage payments. With respect to at least four of the homes involved, the mortgages were federally insured by the Federal Housing Administration, resulting in substantial claims paid by the FHA once the mortgages defaulted.
In addition to the mortgage fraud scheme alleged in the information, Rauso is also charged with willfully failing to file a tax return on behalf of D&B Property Investors, defrauding the government of taxes owed on more than $1.6 million in income.
If convicted, the defendant faces a maximum possible sentence of 247 years in prison, a $6.95 million fine, five years of supervised release and a $2,000 special assessment. (usattedpa62410)
MORAL
Seems like no one wants to learn.
FIFTEENTH PERSON IN NORTH CAROLINA MORTGAGE FRAUD BUST PLEADS GUILTY
FACTS
A Charlotte appraiser is the 15th person who has agreed to plead guilty in the "Waxhouse Investigation," a long-running federal mortgage fraud case. CLINTON BRUCE DARDEN was the owner of VALUESTIMATORS INC. and an appraiser for Mortgage Fraud Cells Nos. 2 and 3, according to federal court documents. Darden faces up to five years in prison and a fine of up to $250,000 for one felony count of mortgage fraud conspiracy. Participants in the fraud agreed to buy homes at one price from builders, arranged buyers at a higher price and then lied to get mortgages at the higher level, according to court documents. Prices were generally inflated by $200,000 to $500,000. At closing, the difference between the two prices was shared by cell members.
Darden's offenses occurred from January through July 2007 according to court documents. Darden is the first appraiser named in the Waxhouse investigation. Federal prosecutors have identified at least five "cells" and negotiated plea agreements with participants including attorneys, builders, a notary, a loan officer and a Los Angeles man who was a so-called "straw buyer" for Cell 2. (charobs62510)
MORAL
The prosecutors are still at it hot and heavy. I recommend you see your attorney now if you believe you were even remotely involved in any "funny loans" in the last 10 years, this being how long the feds have to prosecute anyone involved in mortgage fraud and as you have read, several cases I have published come from 2002 loans (eight years ago.)
MARYLAND MAN CONVICTED OF MORTGAGE FRAUD
FACTS
On June 18, ROBERT DEWAIN VENSON of Fort Washington, Md. was convicted of mail and wire fraud, money laundering and failing to file tax returns in connection with a three-year mortgage fraud scheme involving 13 residential properties.
From 2004 to 2007 Venson negotiated the purchase of 13 residential properties in Maryland and the District of Columbia. Rather than purchase the properties in his own name, the evidence proved that Venson paid straw buyers to appear at the settlement posing as the buyer. Witnesses testified that Venson typically would represent to the straw buyer that he would pay the loan obligation. Venson inflated the price listed on the sales documents to an amount substantially larger than the actual price, causing the mortgage lender to provide funds for the purchase substantially in excess of the actual price. Venson misrepresented and concealed the true purchase price, his arrangement with the straw buyer and other material information from the mortgage lender. Under this scheme, the trial evidence showed that Venson reaped hundreds of thousands of dollars.
Venson failed to file individual federal income tax returns for 2004, 2005 and 2006, during the period of the scheme. BASED ON THE MORTGAGE FRAUD SCHEME, THE INDICTMENT SEEKS FORFEITURE OF PROPERTY, INCLUDING A MONEY JUDGMENT OF $892,371.
Venson faces a maximum sentence of 20 YEARS IN PRISON FOR EACH OF THE EIGHT COUNTS OF MAIL FRAUD, each of the eight counts of wire fraud, and each of the seven counts of money laundering; and one year in prison for each of the three counts of failure to file tax returns. Judge Alexander Williams, Jr. ordered Venson detained pending his sentencing, scheduled for Oct. 7, 2010 at 9:30 a.m. (usattymd61810)
MORAL
Ten to One he gets 10.
ONE MORE PLEADS GUILTY TO FORECLOSURE MORTGAGE FRAUD SCHEME IN MARYLAND
FACTS
On June 21, ROLANDO ALONZO COUSINS, A/K/A "JUNIOR," of Bowie, Md., pleaded guilty to conspiracy to commit mail fraud and wire fraud in connection with a massive mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, but left them homeless and with no equity. With Cousins' plea all 11 defendants in the METROPOLITAN MONEY STORE case have now been convicted.
COUSINS was the senior loan officer with the Metropolitan Money Store, located in Lanham, Md., which offered foreclosure consultation and credit services to financially distressed homeowners. Cousins also owned and operated PROSPER INVESTMENTS LLC. In 2005, JOY JACKSON AND JENNIFER MCCALL incorporated Metropolitan Money Store. Also at that time, Jackson, Jennifer McCall, Jackson's husband, KURT FORHAM, and McCall's husband, CLIFFORD MCCALL and others incorporated FORDHAM & FORDHAM INVESTMENT GROUP LTD. AND BURROUGHS & SMYTHE FINANCIAL SERVICES, INC., based in Lanham and Greenbelt, to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.
From September 2004 through June 2007, Cousins, Jackson, McCall and others, operating through several companies, including the Metropolitan Money Store, fraudulently promised to help homeowners avoid foreclosure, keep their homes and repair their damaged credit, by directing the homeowners to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a one year period, during which time the defendants would help the homeowners obtain more favorable mortgages, improve their credit rating and eventually return title to their homes to them. Cousins, Jackson, McCall and others told the homeowners that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit.
Cousins and other Metropolitan Money Store employees personally served as a straw buyer on several properties in Maryland, because they had good credit history. Cousins and other straw buyers were paid approximately $10,000 to participate in the scheme; fraudulently bolstered the credit of the straw buyers so they could qualify for more favorable mortgages; obtained fraudulently inflated loans on the properties in the straw buyers names; served as straw buyers themselves; stripped away the bulk of the homeowners equity proceeds and converted that money to their own personal use; and stopped making the mortgage payments on the homes, resulting in the homes being foreclosed upon.
The total loss attributable to Cousins from the scheme, including the estimated losses to the mortgage lenders, is $471,702.
Cousins faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy. U.S. District Judge Roger W. Titus scheduled sentencing for Sept. 13, 2010 at 3:00 p.m.
Joy Jackson and Jennifer McCall pleaded guilty to their role in the scheme and were sentenced to 151 months in prison and 135 months in prison, respectively. Nine other coconspirators also have pleaded guilty and been sentenced. (usattymd62110)
MORAL
Looks like two of them received 12 years room and board and 11 years room and board respectively.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
