FACTS
LEHMAN BROS., which failed in 2008 while holding bad real estate loans, on Nov. 15, filed suit against NATIONFIRST LENDING INC., an Irvine mortgage company for allegedly misrepresenting the strength of loans it sold to the Wall Street firm. The lawsuit, filed in federal court in Los Angeles, alleges that Nationsfirst Lending Inc. misrepresented the identities of borrowers, the value and condition of property securing the loans and the validity of loan documents. NATIONSFIRST is listed as a suspended corporation on the California Secretary of State website.
The company sold Lehman an unspecified number of loans from 2004 to 2007, the lawsuit said. Lehman alleges that straw buyers, who never intended to occupy the homes, were used in two of the Nationsfirst loans and that a loan officer received a kickback for making the loans.
THE LAWSUIT AGAINST NATIONSFIRST IS ONE OF SEVERAL SUITS that Lehman has filed against mortgage companies alleging that they misstated the strength of loans and creditworthiness of borrowers. It has FILED LAWSUITS AGAINST CALIFORNIA FINANCIAL GROUP INC. OF PORT ORCHARD, WASH.; FIRST GUARANTY FINANCIAL CORP. OF SANTA ANA; COLONY MORTGAGE LENDERS INC. OF GLENDALE; and other lenders. (lat111710)
MORAL
This is quite a common occurrence now and not only Lehman Bros. but also the FDIC, First Magnus and New Century through the United States Trustee, Chase and others are suing the wholesalers and brokers on bad loans. We are defending numerous people and companies that have been sued. The key thing is do not ignore the lawsuit. There are ways to get to you personally if the default judgment is allowed to be entered. Nationsfirst is suspended. In plain English this means it cannot defend itself in court because it lacks legal standing. Thus Lehman could do a “default prove up” by taking a default judgment after serving the agent for service of process and then arguably chase the principals on alter ego theories for among other things insufficient capital or what is legally referred to as “thin capitalization.”
CALIFORNIA DRE SEEKS TO REVOKE RANCHO BERNARDO REAL ESTATE BROKERS’ LICENSE
FACTS
California real estate regulators are seeking to revoke the license of MICHAEL MONACO, a Rancho Bernardo broker. The Department of Real Estate filed a 15-page accusation against Monaco and one of his companies, SUB 500 MORTGAGE INC.
The Watchdog quoted clients and cited documents and former employees alleging that Monaco took upfront money from hundreds of people and never provided the promised mortgage loan relief.
The state action lists a number of other allegations, saying his "concealment and misrepresentations made it possible for (Monaco) to embezzle, convert or otherwise misappropriate (his client's) investment."
Specifically, the state action alleges that:
• In 2008, Monaco agreed to service an $115,000 investment secured by a property in San Diego, then later admitted to embezzling the funds and signed a promissory note to repay the money but failed to make those payments.
• In 2007, Monaco agreed to service a $90,000 investment secured by a property in Meadow Vista, then arranged for a payoff of the loan the next year and failed to alert the investor.
• In 2006, Monaco agreed to service a $352,000 loan against a property in Hawaii, then the next year he arranged for the loan balance to be paid off, but kept the money rather than pay it to the California investors who held the deed.
In a published report, Monaco said that he had not seen the accusation. When read portions of the document and told about specific allegations, he said he did not know any of the alleged victims.
"None of those names even sound familiar to me," he said in a brief telephone interview. "You do 7,000 or so transactions and some of them are going to be disgruntled."
Monaco was first licensed to sell homes and mortgages by the Department of Real Estate in 1985. In 1990,
The Watchdog offered to provide Monaco a copy of the accusation but he said he did not have access to a private fax machine. He asked that a copy be sent to his lawyer. The Watchdog complied, and both Monaco and his attorney declined to comment further.
"All I'm doing is trying to help people, but it isn't turning out to be as rewarding as I thought it would be," Monaco said. "I deny embezzling any money from these people, or anybody."
At the conclusion of the document, the department requests an administrative hearing to determine whether Monaco should retain his real estate broker's license. No hearing date has been set. The filing claims Monaco has been conducting business under the name INVESTORS FINANCE INC. without proper licensing.
License revocations can take months or longer to process. A licensee is granted many of the same rights as defendants in a criminal case. State regulators declined to discuss specifics of the accusation. "When we file, they're all serious," Department of Real Estate spokesman Tom Pool said. "We wouldn't have filed the accusation if we didn't think it was serious." (sandiegouniontrib111810)
MORAL
What is interesting is that the newspaper reports the accusation but the accusation number is not listed on the DRE licensing site, which is unusual to say the least. It would seem there might be an underlying reason for not listing the “H” number when that is usually the norm.
CALIFORNIA MAN ARRESTED FOR $11 MILLION MORTGAGE FRAUD PONZI SCHEME
FACTS
On Nov. 15, CHRISTOPHER JACKSON OF SACRAMENTO, WAS ARRESTED on a complaint charging wire fraud. Jackson appeared before Magistrate Judge Gregory G. Hollows and was released on pretrial conditions that include a bar on his selling investments of any kind.
The complaint alleges that between 2005 and 2009, Jackson, using the corporate name GENESIS INNOVATIONS, recruited people to invest in real estate. The complaint further alleges that Jackson promised investors a 14% annual rate of return and convinced them to entrust him with their retirement savings. According to the complaint, Jackson received about $11 million from investors, but only invested about $2.5 million in real estate. The complaint states that the rest of the money was used to distribute purported investment returns and to fund Jackson’s lavish lifestyle, which included a leased Lamborghini and Range Rover, a purchased BMW, frequent meals at high-end restaurants, stays at luxury hotels, and jewelry.
The maximum statutory penalty for a violation of wire fraud is 20 years and a fine of the greater of $250,000 or twice the gain or loss from the offense. (usattyndca111510)
MORAL
I trust he has a good attorney. Innocent or not he will need one. The amount of documentation the federal prosecutors have that needs to be reviewed in these types of cases that go to trail is extensive, to say the least.
CALIFORNIA BORROWERS THAT LOSE HOME TO BANK FORECLOSURE CANNOT SUE FOR FRAUD OR CONCEALMENT AGAINST BANK WHOSE ALLEGED AGENT-LOAN CONSULTANT INFLATED BORROWERS’ INCOME IN THE LOAN APPLICATION WITHOUT THE BORROWERS’ CONSENT OR KNOWLEDGE
FACTS
Borrowers Perlas applied to GMAC for a refinance. Part of the loan application allegedly prepared by GMAC loan consultant substantially inflated the income which the Perlases signed without being given the opportunity to review it. The property was foreclosed on due to missing payments and the Perlases sued GMAC for fraud and concealment. GMAC demurred and the trial court sustained it without leave to amend stating no cause of action could be stated against GMAC for fraud and concealment. The Perlases appealed.
The 1st District Court of Appeal said affirmed. The Perlases could not alleged that GMAC represented they could make the loan payments. Plaintiffs tried to allege that by approving the loan GMAC agreed they could afford the loan. A loan transaction is at arms length and there is no fiduciary obligation on the part of the lender to the borrower. (Perlas v. GMAC Mortgage (8-11-10, 1st Dist.) 187 CA4th 429.)
MORAL
Read before you sign and if they refuse to let you take it home, then do not sign it.
FORMER MARYLAND ATTORNEY GUILTY OF MORTGAGE FRAUD
FACTS
On Nov. 12, FRANK P. JENKINS II, OF LAPLATA, MD, pleaded guilty to wire fraud and mail fraud in connection with a scheme to defraud clients of his law practice and lenders in real estate transactions.
Prior to Sept. 15, 2009, Jenkins was an attorney licensed to practice law in Maryland and did business as Frank P. Jenkins PC. Jenkins also utilized the business names THE JENKINS GROUP INC., JENKINS REAL ESTATE INC., AND EXIT PROM HOMES REALTY. On Sept. 15, 2009, Jenkins was disbarred.
Jenkins admitted that from about 2006 through 2009, he caused clients to transfer money into bank accounts that he controlled, and then embezzled the funds for his own purposes, rather than fulfilling his fiduciary obligations to his clients. Jenkins admitted that he used the stolen money to pay his personal expenses, purchase tickets to the Washington Capitals hockey games, and to repay other clients whom he had previously defrauded. Jenkins also made false statements to his clients as to his handling of estates and civil litigation and to lenders. Jenkins also provided his clients with fraudulent documents, including deeds and deeds of trust relating to property. Jenkins admitted that he forged the signatures of his clients, including on a consent decree requiring the clients to pay $150,000 to settle a breach of contract suit.
In June 2009, Jenkins applied for a loan to refinance a property that he fraudulently told the lender he had purchased. In fact, Jenkins had entered into a contract to purchase the property, misrepresenting to the owners of the property that he would file a deed of trust and promissory note. Jenkins did record the deed showing he had purchased the property, but did not record the deed of trust. Jenkins received a check for $128,654.19 from the lender based on the fraudulent loan application. The deed Jenkins filed was subsequently rescinded and restored to the original owners, who were also awarded $150,000 each in compensatory and punitive damages, as well as attorney’s fees, by the Circuit Court for St. Mary’s County.
Jenkins admitted that he was responsible for over $1 million in losses to his clients and lenders. Jenkins faces a maximum sentence of 20 years in prison on each of the eight counts of mail and wire fraud. Chief U.S. District Judge Chasanow has scheduled sentencing for Feb. 28, 2011 at 2:00 p.m. (usattymd111510)
MORAL
All that education and now it is gone to waste. Note how the prosecutors have gone back over four years to get to Mr. Jenkins.
MARYLAND TITLE CO. OWNER PLEADS GUILTY TO STEALING $3.7 MILLION PAYOFF MONEY ON UNDERLYING LOANS
FACTS
On Nov. 15, ANTHONY V. WEIS OF PHOENIX, MD, pleaded guilty to wire fraud in connection with a mortgage fraud scheme to defraud lenders of approximately $3.7 million in just eight months.
Weis was the president and a shareholder of MAPLE LEAF TITLE LLC, a real estate title agency located in Towson, Md. Weis directed MLT employees in 13 real estate closings conducted between February and September 2009 to withhold the payoff checks from institutions that held the existing mortgage loan notes on the properties. In each instance, the settlement statement sent to the borrower’s lender falsely represented that the payoff was being made.
Weis caused monthly mortgage payments to be made to the banks holding the mortgage notes. Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. However, because Weis was unable to send checks in every case where he had misappropriated the payoffs from escrow, a number of MLT clients received delinquency notices for non-payment of the mortgage note. A few were threatened with foreclosure and were forced to hire attorneys to prevent being ejected from their homes.
Because the existing mortgages had not been paid off, the liens against the property were not removed and a title free of pre-existing liens and claims (clear title) could not be passed to the new lender and borrower. An insurance company had issued title insurance policies to the borrowers guaranteeing clear title. As a result of Weis’ criminal conduct, the title insurance company ultimately paid out $3.7 million to financial institutions that held mortgage notes.
Weis faces a maximum sentence of 30 years in prison followed by five years of supervised release and a fine of $1 million. U.S. District Judge Catherine C. Blake has scheduled sentencing for Feb. 4, 2011, at 10:15 a.m. (usattymd111510)
MORAL
I trust he has money to pay an attorney that does not come from the ill-gotten gains. The federal government and courts generally if not universally do not allow the proceeds of the crime to be used to pay for the attorney to represent the defendant.
OREGON PROPOSES TO REGULATE APPRAISAL MANAGEMENT COMPANIES
FACTS
OREGON proposed permanent rules implement the registration requirements of 2010 House Bill 3624 (the Act), which regulates the activities of appraisal management companies. The Act became law on March 23, requiring appraisal management companies doing business in Oregon to register with the Department of Consumer and Business Services by Jan. 1, 2011. The Act requires DCBS to adopt administrative rules establishing a process to audit registered appraisal management companies. These proposed rules establish the general process for audits conducted under the Act. To review the proposed rules go to
MORAL
If you are going to continue being an appraisal management company in Oregon, read the rules now. They may change your mind.
PRESIDENT OF VIRGINIA REAL ESTATE COMPANY FOUND GUILTY OF MORTGAGE FRAUD
FACTS
On Nov. 10, YVONNE L. ROBERTSON OF HAMPTON, VA, was convicted by a federal jury of engaging in a mortgage fraud scheme. Robertson faces a maximum penalty of 30 years on the conspiracy and mail and wire fraud counts, 10 years on the counts charging engaging in monetary transactions in property derived from unlawful activity, and 10 years on the false statement count.
Robertson was first indicted on Feb. 9, along with, MARIA HENDERSON OF VIRGINIA BEACH, VA, on charges of conspiracy to commit mail and wire fraud, as well as 11 separate mail and wire fraud counts. JOSEPH M. GARNER JR., OF VIRGINIA BEACH, VA, was charged separately by criminal information on Feb. 8, with mail fraud. A superseding indictment, returned by a federal grand jury in May 2010, added charges of engaging in monetary transactions in property derived from unlawful activity, as well as making materially false statements to an agent of the United States.
According to the superseding indictment, from November 2006 through May 2009, Robertson operated a real estate investment and property management business known as ANGEL’S TOUCH REAL ESTATE INVESTMENTS LLC LOCATED IN VIRGINIA BEACH. In the course of business, Angel’s Touch would identify investment properties in the Tidewater area for purchase. Robertson signed contracts for the purchases but often assigned the contracts to other individuals (straw buyers) for purchase with promises that she would arrange for the down payment funds and closing costs, that she would then manage the properties by finding renters, collecting rental payments, and making mortgage payments, and that individuals would received cash back from loan proceeds of the property.
Robertson caused false information to be presented to lenders in order to obtain the mortgage loans for the straw buyers. Robertson also failed to deliver on her promises to the borrowers, but fraudulently obtained proceeds from the closings for herself and her company. Robertson routed these proceeds, by wire transfer, into the accounts of various other individuals and, on one occasion, caused money returned to a straw buyer to be given to Robertson through a cashier’s check.
Henderson was a loan officer for a number of companies engaged in mortgage brokering services, including YOURTURN FINANCES AND MORTGAGE STAR INC. Henderson was responsible for taking mortgage loan applications and seeking a mortgage lender for which she received commissions based on the loans she processed. Garner submitted false mortgage documents, through Henderson, to purchase a property for Robertson indicating that he would be the primary occupant. Instead, following closing, the property was occupied by a renter. After a short period of time the property went into default and the renter was evicted.
Henderson pled guilty to conspiracy to commit mail and wire fraud on April 6, and was sentenced to 120 months imprisonment and ordered to pay restitution in the amount of $230,000. Garner pled guilty to a criminal information alleging mail fraud on March 16, 2010 and was sentenced to five years probation and ordered to pay $29,600 in restitution. Robertson is scheduled to be sentenced on March 22, 2011. (usattyedva111210)
MORAL
Guess who cooperated with the government? It seems like 10 years in prison for$230,000 restitution is a bit much. But who knows what else was involved.
APPROXIMATELY 45% of WASHINGTON STATE MORTGAGE LOAN ORIGINATORS HAVE NOT TAKEN STEPS TO RENEW THEIR LICENSE
FACTS
Washington State Mortgage Loan Originators have until Dec. 15, deadline to submit a renewal request for their Washington license. At this point, 32% of MLO licensees have either requested a renewal or had that renewal approved by DFI. These individuals are a step closer to ensuring they will be properly licensed come Jan. 1st.
APPROXIMATELY 45% OF CURRENT MLO LICENSEES HAVE YET TO COMPLETE A CREDIT REPORT AUTHORIZATION VIA THE NMLS. This is a required step in order to complete the renewal process. It is a step being missed by more than 30% of pending renewal requests.
To ensure you are not one of the individuals who haven’t authorized a credit report, check the MLO Renewal Requirement spreadsheet:
MORAL
If 45% have not taken the steps for renewal that will be 45% less competition for Washington State loans. Seems like you ought to renew or apply for a mortgage loan license in Washington State.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
