CALIFORNIA COMPANY SETTLES CLASS ACTION FOR $1.7M
FACTS
Armando Plascencia filed a class action lawsuit against Lending 1st Mortgage on behalf of individuals who had a monthly option adjustable rate mortgage. Plascencia claimed that Lending 1st engaged in unlawful, fraudulent, and unfair business practices by failing to disclose required information in disclosure statements accompanying their loans, such as actual interest rates, the fact that payments on the notes at the teaser rate would result in amortization, and the initial interest rate was discounted and did not represent the actual interest that borrowers would have to pay.
Palscencia asserted this violated the Truth in Lending Act by failing to make these disclosures. Lending 1st raised various motions that appear to have been denied and that it did not fail to make the disclosures and did not violate the Truth in Lending Act. Nevertheless, the case settled for $1.7 million. (Plascencia, et al. etc. vs. Lending 1st Mortgage, etc. USDC northern CA. Case No. 4:07-cv-04485-CW)
MORAL
If this happened to you with a different lender maybe you can get representation. But I forewarn you there were eight different law firms with fifteen attorneys representing the plaintiff so it is not an easy “row to hoe.”
CALIFORNIA BORROWERS CAN COMMIT FRAUD ON A SECOND MORTGAGE AND STILL GET THE LOAN DISCHARGED IN BANKRUPTCY
FACTS
In 2006 Jesus Montano obtained two loans from WMC Mortgage Corp. using a mortgage broker. The first mortgage was for $348,750 and the second mortgage was for $89,990. The money was used to purchase a home in Oakland, Calif. He lived in the property for seven months until he could no longer afford the payments. Montano then defaulted and WMC foreclosed on the first mortgage.
In 2009, Heritage Pacific Financial, LLC purchased the now unsecured note on the second mortgage and sued Montano for fraud claiming that Montano obtained the second mortgage by misrepresenting the financial information. Montano stated the information were forgeries perpetrated by the mortgage broker. Montano filed for bankruptcy and contended that the California anti-deficiency statutes barred the claim by Heritage. The bankruptcy court granted summary judgment in Montano’s favor finding he was protected by Section 726 of the Code of Civil Procedure which barred the Heritage claim.
Heritage appealed to the Bankruptcy Appellate Panel of the Ninth Circuit which said affirmed. When a loan originator makes a loan secured by a mortgage or deed of trust on real estate based upon the fraudulent conduct of the borrower to induce the lender to make the loan, the lender may sue the borrower to recover damages.
However the anti-deficiency statute prohibits the lender from pursuing the borrower for fraud with respect to loans secured by owner-occupied residential real property” when actually occupied by the borrower and the loan is for $150,000 or less! (Heritage Pacific Financial LLC v. Montano (In re Montano, US Bankruptcy Appellate Panel, 9th Cir. No. 12-1579, 11-1-13)
MORAL
If a borrower has been foreclosed upon and there is a second mortgage and the property was owner-occupied with a loan under $150,000, the holder is out of luck and cannot sue on the note based upon this “one action rule.”
CALIFORNIA MAN GETS FOUR YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD AND LYING ON THE WITNESS STAND
FACTS
On Nov. 13, Brandon Hanly was sentenced in Sacramento U. S. District Court to four years in prison for a mortgage fraud scheme.
From September 2005 to April 2006, Hanly and others participated in a scheme to defraud lenders. In order to obtain loans and cash above the true value of a house, they provided the lender with inflated appraisals and title reports with fake liens in the name of a shell company, TPG Investments Inc. Then the defendants gave the lender and escrow officer instructions to pay off the lien to TPG. At trial, Hanly testified that he was a victim of the scheme, but the evidence showed that he personally received more than $300,000 as a result of his participation.
The trial judge found that Hanly had committed perjury in his trial and increased the sentence in order to “send a message to people who would commit this crime and who would lie about it when they come to court.” (usattycaed111313)
MORAL
First note the federal prosecutors chased him for loans that occurred eight years ago. They have 10 years to file a criminal complaint. So what does this mean? Anyone that has been involved in mortgage fraud in any capacity over the last 10 years should consult with their attorney.
THREE INDICTED IN HOUSTON FOR FRAUD
FACTS
On Nov, 13, an 11-count indictment was unsealed following the arrests of Rita “Jessica” Martinez, her husband Gilbert Martinez and her brother Felix Martinez. They have been accused of conspiracy and bank fraud.
All are charged for their alleged involvement in a scheme to defraud Farmers and Merchants Bank of Long Beach, California, of bank loans for themselves and others. According to allegations in the indictment, Jessica Martinez worked as a loan processor at a Houston area-business known variously as Globan Mortgage Co., Casa Milagro and First Milagro. She allegedly submitted falsified loan applications for Gilbert and Felix Martinez and others to Farmers and Merchants Bank. The indictment alleges the defendants completed loan applications containing falsified income information and provided false information about borrowers’ employment, income, and assets.
The government is seeking forfeiture of a home in New Caney which allegedly was purchased with proceeds from the purported fraud.
The maximum penalty if they are convicted of conspiracy and bank fraud is 30 years in prison and a $1 million fine. (usattysdtx111313)
MORAL
As I have said before sealed indictments usually mean the prosecutors do not want the information public and request the court unseal it on the day they intend arrests to be made. Seeking forfeiture of the home is a drastic measure.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
