DEBTOR IN BANKRUPTCY THAT PROPOSES CHAPTER 13 PLAN TO STRIP SECOND MORTGAGE AS UNSECURED IS STILL IN GOOD FAITH
FACTS
Angel Lepe filed a Chapter 13 bankruptcy. He listed $363,900 in assets and $581,380 in liabilities including $549 in unsecured debts. He listed monthly income of $2,631 and $2,481 in monthly expenses. Lepe proposed to make monthly payments on the first mortgage on his house directly and to “strip” the second mortgage on his house treating that creditor’s claim as unsecured and to pay $150 per month for 36 months to the trustee. The trustee objected to confirmation of the plan arguing that the plan and petition had not been filed in good faith because Lepe’s unsecured debt was $549 and the had sufficient monthly income to pay his monthly expenses and debts and the only reason he filed bankruptcy was to use the chapter 13 to strip the second mortgage on his house. Lepe then filed a first amended petition, which increased the monthly payment to the trustee to $275, which in turn increased the proposed paybacks on the unsecured claims. The trustee still opposed the plan but the bankruptcy court approved it finding there was no evidence of bad faith. Trustee appealed.
The Bankruptcy Appellate Panel said . . .
Affirmed. The plan must be proposed in good faith. In determining this the bankruptcy court must examine the totality of the circumstances using 11 factors including (1) amount of payment; (2) debtor employment history, (3) duration of plan, (4) accuracy of disclosures in the filing, (5) preferential treatment if any, between creditors, (6) extent secured claims are modified, (7) type of debt to be discharged and whether it is nondischargeable under chapter 7, (8) existence of extraordinary expenses such as medical bills, (9) frequency that debtor has previously filed bankruptcy, (10) motivation and sincerity of the debtor in filing the Chapter 13 and (11) the burden placed on the trustee in administering the plan. Insolvency is not a prerequisite to a finding of good faith, and if a debtor proposes a plan in accordance with the bankruptcy code this does not constitute bad faith. The debtor’s chapter 13 plan may strip the lien of a creditor holding a claim secured by the debtor’s house where there is no value to support the lien. The plan by the debtor to strip the second mortgage lien is allowed by the bankruptcy code and the court found that Lepe was not planning to strip the lien while he was solvent. (bap no. EC-11-1349-PaDMk, Bk. No. 10-60264, 5-9-12)
MORAL
Now you see how a second mortgage and possibly a third mortgage disappear.
CONSUMER FINANCIAL PROTECTION BUREAU PROPOSES NEW RULES TO BE EFFECTIVE JAN. 1, 2013 TO MAKE LIFE MORE DIFFICULT FOR LENDERS AND LOAN ORIGINATORS
FACTS
The new rules will cover origination points and fees. The rules will require that any discount point must be “bona fide,” meaning that consumers must receive at least a certain minimum reduction of the interest rate in return for paying the discount point. (I can just see the lawsuits now stating there was no discount) The rules also require lenders to offer borrowers a loan option that does not include discount points. The rules will also prohibit brokerage firms and creditors from charging origination fees that vary with the size of the loan. (Now that is funny, since Dodd Frank Act makes that the one exception on which to base the origination points) Brokerage firms and creditors will be allowed to charge only flat origination fees.
The rules also control mortgage loan originator qualifications and compensation. There will be uniform requirements regarding loan originators’ character, fitness and financial responsibility, criminal background checks and training requirements.
FIVE STATES MAKE UP FOR NEARLY HALF THE TOTAL FORECLOSURES IN THE UNITED STATES
FACTS
From May 2011 through April 2012 five states account for nearly half the total of foreclosures that occurred over the past year. In April 2012, 66,000 foreclosures took place across the country. Approximately 1.4 million homes, or 3.4% of all homes with a mortgage, were in the foreclosure inventory as of April.
For the last 12 months, more than 838,000 foreclosures have been finalized nationally. But 409,000 of these foreclosures came from five states, with California being number one. California completed 142,000 foreclosures in the last 12 months followed by Florida (92,000), Michigan (60,000), Texas (58,000) and Georgia (57,000). These five states accounted for 48.8% of all completed foreclosures nationally.
TWO CALIFORNIA BILLS PASS BOTH ASSEMBLY AND SENATE GIVING MORE RIGHTS TO TENANTS RENTING PROPERTY IN FORECLOSURE
FACTS
Two bills to help tenants who suddenly find themselves with the possibility of being displaced because of a foreclosure passed the Assembly and Senate. The bills are part of the Attorney General's proposed California Homeowner Bill of Rights.
Assembly Bill 2610 and Senate Bill 1473 will require purchasers of foreclosed homes to give tenants at least 90 days before starting eviction proceedings.
Under the bills, if the tenant has a fixed-term lease, the new owner must honor the lease unless the owner demonstrates that certain exceptions intended to prevent fraudulent leases apply. (CAAG53112)
MORAL
If the Governor signs the bills then the new owners that purchase foreclosure property must take into consideration any tenant occupants and existing leases. Which means somehow to contact the then owner and the tenants?
LITTLETON, COLORADO MAN INDICTED FOR MORTGAGE FRAUD
FACTS
On May 23, Peter Vincent Capra, age 55, of Littleton, Colo., was indicted by a federal grand jury in Denver on additional charges of wire fraud, mail fraud, and money laundering, the U.S. Attorney’s Office. Capra was charged in a previous indictment with obstruction of justice.
According to the information contained in the indictment, Capra was the president of Golden Design Group Inc., which built and sold houses in the Denver metropolitan area. Capra was also the registered agent for Distinctive Mortgages LLC, which used GDG office space and provided mortgages for some of the purchasers of GDG houses.
As part of the fraud, Capra caused the creation of Cambridge Real Estate Consulting LLC, and Chateau Real Estate Investments LLC. Although publicly filed paperwork suggested that these were independent entities, Capra or his associate, a person with the initials R.P., directed all activities of Cambridge and Chateau and controlled their bank accounts.
Between Jan. 1, 2005 and July 31, 2008, Capra executed and attempted to execute a scheme to defraud mortgage lenders through the use of applications for residential mortgage loans and related documents associated with real estate purchases in the Denver metro area. As part of the scheme, Capra would structure transactions involving homes built and sold by GDG to allow buyers to receive substantial amounts of the lenders’ money at the time of closing without the lenders’ knowledge.
Capra was able to facilitate his scheme by causing first and second mortgage applications related to the real estate purchases be submitted with false and fraudulent representations about the purchasers income, liabilities, and intent to occupy the properties as their primary residences. Many of the purchasers bought multiple properties at or near the same time in an attempt to prevent lenders from discovering the extent of the buyer’s real estate liabilities.
At the closing or soon thereafter, Capra would cause funds to be distributed to the buyers in ways that prevented the lenders from knowing the funds were actually going to the buyers. The methods included the disbursement of funds to LLCs, causing buyers to sign false warranty waivers, making payments to the buyers through Cambridge, Chateau, or other sham entities, and having GDG issue checks directly to the buyers which were not reflected on the HUD-1 closing statements. The disbursements to buyers were usually in amounts between $85,000 and $130,000.
The indictment also includes an asset forfeiture allegation, which states that upon conviction of the offenses mentioned in the indictment, the defendant shall forfeit to the United States all property involved in or traceable to property involved in such offense(s), including but not limited to a money judgment. (usattyco52412)
MORAL
He certainly was busy if true. Look at the number of LLCs he created and the federal authorities went back seven years. Remember, he is innocent until proven guilty in a court of law.
PENNSYLVANIA MAN INDICTED FOR MORTGAGE FRAUD
FACTS
On May 24, Michael J. Smith, 31, of Springfield, Pa., was charged with joining a mortgage fraud conspiracy that resulted in losses of more than $600,000.
Federal prosecutors said Michael J. Smith, 31, of Springfield, was a mortgage broker for companies in West Chester and Newtown Square, who schemed with John C. Lucidi and Eric Maratea, among others, to buy properties at the Jersey Shore at inflated prices so buyers could receive kickbacks of tens of thousands of dollars.
Smith, who was one of the buyers, schemed with Lucidi, Maratea and others between October 2006 and June 2007, to purchase properties in North Wildwood, N.J., authorities said. The indictment said that the kickbacks were not disclosed to various mortgage lenders and that Smith applied for the mortgages himself and helped others apply for mortgages using bogus information.
Smith was charged with conspiracy, wire fraud and money laundering.
Maratea and an individual identified in the charging document as "B.K.," were buyers of Smith's properties but made few or no payments on their mortgages, forcing lenders to foreclose on the properties and resell them at a fraction of the unpaid balance to recover losses, the indictment said.
Smith profited from the scheme, the indictment said, by making inflated commissions on the transactions, by receiving kickbacks on his own purchases and by making a profit when he managed to flip them at inflated prices to other buyers.
Lucidi, of Jacksonville, Fla., who was also formerly a mortgage broker in West Chester and Newtown Square, pleaded guilty to mortgage fraud in August that cost banks more than $7 million between May 2005 and October 2008. He is to be sentenced next month and could face a prison term on nine to 11 years.
Maratea, who worked for a painter's union, was charged with conspiracy, wire fraud and related offenses by the U.S. Attorney on May 7. Court records indicate he has guilty plea hearing scheduled for June 19, 2012. (mortdly52912)
MORAL
Prosecutors still going back to loans that occurred six years ago and still pursuing brokers and loan officers. Remember, those charged are innocent until proven guilty in a court of law.
FOUR PEOPLE IN THE STATE OF WASHINGTON FACE AN $8.7 MILLION MORTGAGE FRAUD INDICTMENT
FACTS
On June 1, Jonathan Mendoza Martinez, 34, of Bellevue, his sister, Jazmin Villaba Martinez, 30, of Seattle, Celia Perez Morales, 35, of Kirkland, and Jorge Castrejon Pichardo, 41, of Mountlake Terrace appeared in federal court to face 21 counts in an $8.7 million mortgage fraud scheme that involved more than 50 mortgages to fake people, according to the United States Attorney's office.
Three of the people allegedly worked at mortgage or escrow companies and one was a tax preparer, according to the U.S. Attorney's Office. According to the U.S. Attorney's Office, the scheme defrauded more than 10 banks, financial institutions and mortgage lenders and more than 50 mortgages were involved on properties, including ones in Bellevue, Redmond, Kirkland, Medina, Renton and South Seattle.
Three of the defendants allegedly worked at Emerald City Escrow and a Nationwide Home Mortgage and the fourth defendant worked at a tax preparation business, according to the government press release.
According to the U.S. Attorney's Office, between 2006 and 2008, the three that worked for mortgage or escrow companies allegedly created straw buyers to defraud banks and the one that worked in tax preparation allegedly provided some of the false documentation submitted with the loan applications.
The four face accusations of submitting false financial, employment, and tax information to apply for residential mortgage loans, and falsely inflating the sale price of the properties.
After the lenders funded the loans, the straw buyers quickly defaulted on the mortgages, and the four allegedly kept the excess proceeds, according to the press release.
The victim banks included Washington Mutual (now JPM Chase), Bank of America, American Sterling Bank, ING Bank, IndyMac Bank, and Merrill Lynch & Co., Inc., among others. According to the press release from the office, the group is accused of borrowing fifty mortgage loans representing approximately $22.4 million in loan proceeds based on false and fraudulent representations, resulting in a loss to financial institutions and mortgage lenders totaling approximately $8.7 million.
Each count in the indictment is punishable by up to 30 years in prison and a $1 million fine. (usattyedwa6112)
MORAL
Federal prosecutors still prosecuting old loans and they have ten years from when the loan funded in which to file charges. Remember, those charged are innocent until proven guilty in a court of law.
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