FACTS
1. For purposes of this rule, payments made by creditors to loan originators are not payments made directly by the consumer, regardless of how they might be disclosed under HUD's Regulation X, which implements the Real Estate Settlement Procedures Act.
2. Because the long-term performance of the loans is not a term or condition of a loan it is permissible to go back and “ding,” or take back part or all of the commission on a particular loan from a loan originator, if the loan has an early default because that's not a term or condition. However, you should be certain you are not violating wage and hour laws of the Fair Labor Standards Act and not violating state wage and hour laws as set forth by the Division of Labor Standards Enforcement in California or for that matter, any other state.
3. Compensation to originators can vary based on how the loan application was produced, for example, commissions may be higher for leads generated by the originator versus the company. Federal Reserve Board staff states that as long as compensation is not based on loan terms or conditions, or a proxy, it is okay. If pricing of two loans differs, there may be a concern that channel is being used as a proxy for loan terms or conditions but other factors may justify differences. Be certain you can prove it in the event of an audit.
4. A mortgage loan originator is a person who arranges, negotiates or obtains a loan for a consumer and whose compensation is based on whether any particular loan is originated. Thus there are two sets of requirements to be a loan originator: (1) arranging, negotiating or obtaining a loan for a consumer and also (2) having compensation based on any particular loan. Both sets of requirements must be met for a person to be a loan originator. (mbaweenar23)
5. A loan originator may not pay some or all of the third party fees of a consumer or otherwise credit the consumer out of his own pocket.
6. For purposes of the Dodd-Frank rule affiliates are treated as a single person, so that when a lender acts as a mortgage broker and is thus, a loan originator for purposes of the rule where there is a party that is an affiliated settlement service provider, such as a title company, the bona fide and reasonable charges received by the affiliated settlement service provider are also considered part of the loan originator compensation. (So if the loan originator owns a separate escrow the escrow charges would be part of the compensation for purposes of Dodd-Frank.) (mbawebinar38)
MORAL
These are just reminders and memory joggers so you stay or get in compliance. Remember when the Consumer Finance Protection Bureau goes on line July 21, audits will start soon thereafter. They have already started transferring attorneys from HUD/RESPA and other areas to the new bureau.
HAMP SERVICERS NOW DOING PRINCIPAL REDUCTION ON LOANS
FACTS
Mortgage servicers participating in the Home Affordable Modification Program are starting to use principal reduction more often to help underwater borrowers make their payments more affordable. The HAMP report released on July 1 indicates that HAMP servicers have completed 4,900 modifications involving principal reduction. The median average principal amount reduced was $69,500 per loan.
The May HAMP performance report also provides more data on modifications of second liens. Servicers have modified 28,800 second liens and extinguished 1,500 second liens. The average amount of the fully extinguished second liens was $65,250. Bank of American has extinguished 1,340 second liens and Wells Fargo Bank has extinguished 106 second liens. CitiMortgage and JPMorgan Chase have not extinguished any second liens, according to the HAMP report. (nmn7611)
MORAL
Sounds like the banks are getting some financial sense after four years. It is better to limit your losses than be stubborn and make them 50% larger.
REMINDER TO INITIAL LENDERS AND SUBSEQUENT SERVICERS ABOUT MORTGAGE INSURANCE
FACTS
Fannie Mae has made a number of changes to mortgage insurance requirements. Sellers are required to obtain mortgage insurance policies on loans before delivery to the secondary lender if the mortgage has a loan-to-value ratio in excess of 80%. Servicers are required to keep the coverage in effect during the life of the loan unless Fannie Mae's conditions for canceling MI coverage are met.
MORAL
Servicers do not keep the MI in effect and you may find yourself owning the loan.
UNEMPLOYED HOMEOWNERS TO BE GIVEN REPRIEVE BY NOT PAYING FHA MORTGAGES FOR ONE YEAR WITHOUT FEAR OF FORECLOSURE
FACTS
The Obama administration will require servicers of mortgage insured by the Federal Housing Administration to extend the forbearance period provided to unemployed homeowners because of the unusually long time it is taking for people to find new jobs in this economic downturn.
Starting Aug. 1, servicers will have 60 days to implement the change. This means on Oct. 1, the 12-month forbearance should begin.
In addition, the administration said mortgage servicers who participate in the federal Making Home Affordable Program also will be required to give their delinquent and unemployed mortgage borrowers at least 12 months forbearance when that is possible under regulator and investor guidelines.
HUD said details of the revised forbearance program, including exactly how many months delinquent a borrower may be when filing for help, are still being drafted.
HUD Secretary Shaun Donovan said 3,500 families become 90 days delinquent on their mortgages each month because of unemployment,
The 12-month forbearance does not apply to houses purchased through loans provided through Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac currently offer three to six months forbearance to unemployed borrowers, with the possibility of a further extension of up to a year on a case by case basis, according to Corinne Russell, spokeswoman for the Federal Housing Finance Agency that regulates them. (prent7811)
MORAL
May be you can use this to help homeowners about to go into foreclosure? Longer periods to try for loan modifications? For principal reduction? For short sales?
IN CALIFORNIA COMMISSIONED SALESPEOPLE THAT SPEND OVER 50% OF THEIR TIME OUTSIDE AND RECEIVE AT LEAST 50% OF THEIR PAY IN COMMISSIONS ARE EXEMPT FROM OVERTIME AND OTHER WAGE AND HOUR LAWS. HOWEVER, WHAT IS THE DEFINITION OF COMMISSION?
FACTS
Federal and California law exempt retail salespersons who earn at least 50% of their wages from commissions and over 50% of their time in outside sales from the minimum wage and overtime laws of the state of California.
According to California Labor Code Section 204.1 a commission is: “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount of value thereof.”
A warning is that “deducting expenses such as overhead costs from the sales price before calculating the commission may disqualify the payment the payments as a commission and thereby subject the employer to minimum wage, overtime and other wage and hour laws. (ladlyjlp.4 6-18-11)
MORAL
What does this mean? If you are paying commissions only for outside sales be careful how you calculate it. All commission contracts should therefore be reviewed again with the above in mind. See your attorney now if you are using this type of contract.
BEVERLY HILLS ATTORNEY SUED IN CLASS ACTION OVER ALLEGED LOAN MODIFICATION SCAM
FACTS
On June 8, two nonprofit groups filed a class action in Santa Clara County Superior Court against Beverly Hills attorney Ken Nathanson, of Nathanson Law Center, and Adee Amin, the operator of an alleged sham corporation called RewriteMyLoan.com. The two people are alleged to have lured at least 90 homeowners in the Bay Area into paying thousands of dollars for loan modification assistance but did little or nothing to help the borrowers, according to the lawsuit. The allegations are denied by the attorney defendant.
The complaint alleges Nathanson “sat atop a loan modification scam network" that funneled desperate homeowners threatened by foreclosure to his prior law firm.
MORAL
Aside from the nonprofit attorneys working for plaintiffs there are attorneys doing it pro bono from a major law firm. I trust Nathanson has E&O insurance.
SIX LOS ANGELES COUNTY RESIDENTS CHARGED IN $4 MILLION MORTGAGE FRAUD SCHEME
FACTS
Six Los Angeles County residents have been charged for their roles in a mortgage fraud scheme that used fraudulent loan applications and supporting documents to convince lenders to fund approximately 20 loans that resulted in approximately $4 million in losses. If convicted each faces a maximum sentence of 95 years imprisonment and a fine of $1,000,000 or twice the amount of the total losses to the lenders.
On June 23, Anthony Lewis, Maria Arriaza and Deon Jackson (a mortgage broker) were indicted by a federal grand jury on three charges of wire fraud in violation of 18 U.S.C. § 1343 and one charge of conspiracy in violation of 18 U.S.C. § 371.
On the next day Jennifer Le, formerly a loan processor from the South Bay, was charged with conspiracy in violation of 18 U.S.C. § 371, while Matthew Balsz, a former U.S. Bank employee, and Freddy Lentz a former Bank of America employee, were charged with accepting bribes to assist the mortgage fraud scheme, in violation of 18 U.S.C. § 215(a)(2).
According to the indictment and the informations, Lewis and others obtained funds from financial institutions by making false statements on, and omitting material information from, loan applications submitted to purchase houses in the names of straw buyers. Lewis identified properties for purchase and gave fraudulent loan applications to Jackson and Le. Jackson reviewed the false applications and told Lewis what financial information was necessary to qualify straw borrowers for loans. Lewis then obtained fraudulent documents such as false bank statements, Forms W-2, and pay-stubs. Lewis, Jackson, and Le also obtained false verification of deposit forms from the two bank employees receiving bribes from Lewis. Jackson and Le submitted the fraudulent loan applications to lenders. Once the loans were approved and funds were wired to Arriaza’s escrow company, Diamond Clear Escrow, Arriaza disbursed funds intended for the purported buyers to certain co-conspirators and others, at Lewis’ directions. In order to conceal the true nature of these disbursements, Arriaza prepared false settlement statements for the lenders. (usattycdca7811)
MORAL
The FBI follows the money and at the end of the money trail they find the people “of interest.’
THREE LOAN OFFICERS AND TITLE REP IN FLORIDA CHARGED WITH REVERSE MORTGAGE AND LOAN MODIFICATION FRAUD
FACTS
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Tony West, Assistant Attorney General for the Civil Division of the U.S. Department of Justice; John P. McCarty, Assistant Inspector General for Investigations, U.S. Department of Housing and Urban Development; Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division; Henry Gutierrez, Inspector in Charge, U.S. Postal Inspection Service; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation, announced the unsealing of a criminal information charging four defendants for their participation in a $2.5 million Home Equity Conversion Mortgage (a.k.a. reverse mortgage) fraud scheme.
On July 6, Louis Gendason, Kimberly Mackey, John Incandela and Marcus Echevarria, were charged with one count of conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349. If convicted, the defendants each face a statutory maximum term of imprisonment of up to 30 years in prison and a maximum fine of $1,000,000.
According to the Information, from May 2009 through November 2010, the defendants engaged in a reverse mortgage scheme that defrauded unwitting borrowers, Genworth Financial Home Equity Access Inc., and the Federal Housing Authority.
The information alleges that defendants Gendason, Incandela, and Echevarria worked at 1st Continental Mortgage as loan officers and solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan financed by Genworth. To qualify the borrowers for the loans, Gendason allegedly altered real estate appraisals to fraudulently inflate the value of the borrowers’ properties. In fact, however, none of the borrowers had sufficient equity in their properties to qualify for a reverse mortgage. The defendants then submitted the fraudulently inflated appraisals to Genworth. Based on the false documentation, Genworth approved and the FHA insured more than $2,572,813 in reverse mortgage loans.
As a further part of the conspiracy, Mackey, a licensed title agent and proprietor of Real Estate One Land Services Inc., Pittsburgh, fraudulently closed the Genworth loans, failing to pay off the borrowers’ existing mortgage loans. Genworth wired the loan proceeds to Mackey as the designated closing agent for 1st Continental. Mackey attempted to conceal the fraudulent loan closings by preparing false HUD-1 settlement documents that showed that the existing mortgages had, in fact, been paid off. Between May 2009 and November 2010, Mackey received loan proceeds from Genworth totaling $2,572,813.19. Mackey fraudulently diverted at least $988,086.33 to a bank account controlled by Incandela and Gendason, who along with Echevarria, used this money for their personal benefit.
Thereafter, defendants allegedly engaged in a loan modification scheme to conceal the existence of the Genworth reverse mortgage transactions from the original mortgage lenders, whose loans remained unpaid. To this end, Gendason, Incandela, Echevarria and Mackey conspired to create fictitious offers to buy some of the borrowers’ properties, in the form of “short sales.” A short sale is a sale of real estate in which the sale proceeds are less than the balance owed on the loan to the mortgage lender, but avoids foreclosure and related costs. In other instances, to hide the existence of the Genworth reverse mortgage loan from the original lenders, the defendants made monthly mortgage payments to the borrowers’ original lenders. (usattysdfl7611)
MORAL
Did you notice there are seven governmental agencies that were chasing these people?
ENTIRE TEXAS FAMILY PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On July 5, Claymon "Butch" Trammell, his wife Jeannettea Williams and daughter Michelle Trammell all pleaded guilty to conspiracy to commit wire fraud for their roles in a multi-million-dollar mortgage fraud scheme before United States District Court Judge Vanessa Gilmore.
From 2003 until the end of 2006, Claymon Trammell conspired with his wife and daughter to defraud mortgage lenders. Claymon Trammell and Williams recruited and paid individuals to act as straw borrowers on applications for residential mortgage loans, even though the borrowers had no intention of making payments on the mortgage loans or, in the case of homes supposedly purchased as “primary residences,” of residing in the homes. Some borrowers were used multiple times, including one borrower whose name and credit was used to “purchase” approximately 17 homes. Claymon Trammell pitched the scheme as an investment where the straw borrowers would not need any money down, would not be responsible for the monthly payments and would get money for the use of their name and credit.
At times during the scheme, Michelle Trammell and Williams were licensed mortgage loan officers. Michelle Trammell acted as a loan officer in the transactions and filled out loan applications in the names of borrowers and knowingly provided lenders with false information and documents about the borrower’s employment, income, assets and intent to occupy the purchased property. Michelle Trammell and Williams provided lenders with various documents she knew to be false, including false verifications of deposit, false verifications of rent and false earnest money contracts. There were more than 70 homes involved in the scheme, all of which went into payment default and most into foreclosure. The three defendants caused lenders to fund loans to purchase more than 70 homes in the Houston area and personally benefited by funneling some of the loan proceeds to themselves via businesses they controlled and/or owned via bogus repair invoices and realtor and loan officer commissions.
For their conviction of conspiracy to commit wire fraud in violation of 18 U.S.C. Section 371, the defendants face a maximum of five years’ imprisonment, a $250,000 fine, as well as up to a three-year term of supervised release at their sentencing, scheduled for Dec. 5. As part of their plea agreements, the defendants also agreed to pay restitution if ordered to do so by the court. (usattysdtx7611)
MORAL
As I have said so many times over the years, the family that commits fraud together gets to go to prison together. Although why parents involve their children I will never understand.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
