RESPA REMINDER
FACTS
While RESPA does not prevent a seller from insisting that a buyer use a particular lender, the new Dodd-Frank Act might under the “anti-steering” provisions. (see app 2-8(20))
MORAL
In this lawyer's opinion there are potential conflicts between the “Informal Opinion” letters of RESPA and Dodd-Frank. So before you act on the RESPA laws, regulations and informal opinions, be certain to check the Dodd-Frank Act for conflicts first.
MORE BANK FAILURES MEAN MORE LAWSUITS BY FDIC ATTORNEYS SEEKING TO RECOVER THE LOSSES OF PORTFOLIO LOANS
FACTS
Up to now only 17 bank failures took place between Jan. 1 and last week. However, five more banks have failed and been taken over by FDIC—two banks in Maryland, one in Minnesota, one in South Carolina and the Palm Desert Bank in Palm California. Now 22 banks have failed year to date (about five per month). Between Jan. 1, 2011 and April 2012, 114 banks have failed.
This means (as is already being done) that FDIC is probably auditing all the portfolio residential loans held by these banks for any irregularity whatsoever. When they find one they send it to at least two firms I am aware of. One in California and one in Arizona to get the money back that the bank lost. We have been dealing with the firms and FDIC reasonably successfully. But it is critical that you see your attorney when you get the first letter. Do not ignore it. It will not go away and it will get worse if ignored. (ocrbusp3-4-25-12)
MORAL
If you funded a loan through any of the banks which have failed, then there is a very good change the loan will be audited if it did not perform as of the date the FDIC took it over. Any questions?
SO YOU THINK THE OLD LOANS WITH MORTGAGE MISINFORMATION IN THEM WILL NOT COME BACK TO HAUNT YOU? WELL THINK AGAIN.
FACTS
Mortgage activity raising suspicion of fraud last year increased 31% in the nation compared to 2010, according to filings submitted to the Financial Crimes Enforcement Network. California had the largest amount of suspicious mortgage activity reported.
Riverside County ranked third among the nation's counties in the number of individuals suspected of mortgage fraud. The Riverside-San Bernardino metropolitan statistical area was fourth among U.S. metropolitan areas.
The national increase in reports of suspicious mortgage activity was due to red flags discovered in the underwriting of older mortgages and which have prompted current owners like Fannie Mae and Freddie Mac to demand that they be repurchased by the original lenders. Fraud spotlighted by the report involved phony appraisals, misstatement of income and financial liability by borrowers, bogus documents and identity theft, among others.
Lenders are screening new loan applications and denying those that seem fraudulent, said Bill Grassano, FINCEN spokesman. "It definitely seems they are taking a harder look and they know what to look for," he said. (prsent42512)
MORAL
FINCEN receives SAR reports. The Consumer Financial Protection Bureau requires even mortgage brokers to file the reports. The reports are then filtered and among others sent to the local office of the FBI for further investigation as determined by that office. You will note Fannie and Freddie as well as the FDIC are reviewing old loan files that are non performing for buy back purposes. FDIC is reviewing the files from the banks they took over which I believe were 17 last year. We have quite a few calls on buyback demands or demands to pay for the loss now related to the Mortgage Recovery Group, an attorney in Arizona and others.
ARIZONA ATTORNEY GENERAL SUES LOAN MODIFICATION COMPANY FOR DECEPTIVE LOAN MODIFICATION SERVICES
FACTS
On April 23, Arizona Attorney General Tom Horne filed a lawsuit against Mortgage Relief Group which did business as Mortgage Assistance Group and its owner Stan Allotey alleging that the defendants engaged in deceptive loan modification services.
The lawsuit alleges that since at least February of 2008, the company deceived consumers into paying fees, ranging from $995 to $3,245, for loan modification services by misrepresenting their ability to help consumers obtain mortgage relief and save their homes, thereby violating the Arizona Consumer Fraud Act.
The defendants are also accused of using deceptive means to lure financially distressed homeowners into paying up-front fees with promises that the company would prevent foreclosure and save the consumers’ homes by negotiating modifications of mortgage loans. Also, the company allegedly continued to charge or collect up-front fees even after the enactment of the Arizona Foreclosure Consultant Regulation Law’s ban on charging or collecting such fees.
Once homeowners paid the upfront fees, the defendants allegedly often failed to perform their part of the contract, keep homeowners informed of the status of their application for a modification, refund fees, or otherwise do anything to earn their fee.
The complaint asks the court to bar defendants from conducting any further foreclosure consulting business, impose civil penalties against the defendants of up to $10,000 for each violation, pay the State of Arizona its costs of investigation and prosecution, and provide refunds to consumers. The suit was filed in Maricopa County.
MORAL
I would say Allotey needs a good attorney within 20 days of being served with the complaint.
TWO NORTHERN CALIFORNIA REAL ESTATE INVESTORS AGREE TO PLEAD GUILTY TO BID RIGGING AT PUBLIC FORECLOSURE SALES
FACTS
On April 26, felony charges were filed in San Francisco Federal Court against Lydian Fong and Matthew Worthing. who have agreed to plead guilty to their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in northern California.
According to court documents, Fong and Worthing conspired with others for various lengths of time between October 2009 and November 2010 not to compete against one another but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco County. Worthing was also charged with participating in a similar conspiracy in San Mateo County from September 2010 until January 2011. Fong and Worthing also were charged with conspiracies to use the mail to carry out a scheme to fraudulently acquire title to selected properties sold at public auctions.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud. (usattysf42612)
MORAL
If they agreed to plead guilty as quoted then the probability is they have told the FBI who else was involved. If you are one, see your attorney now. The count of guilty pleas is 22 and counting.
CALIFORNIA TAX PREPARER SENTENCED TO OVER THREE YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD AND AIDING AND ASSISTING IN THE PREPARATION OF FALSE TAX DOCUMENTS
FACTS
On April 23, Patricia Ann King was sentenced to three years and one month in prison for her role in a mortgage fraud scheme and for aiding and assisting the preparation of false tax documents in connection with her tax preparation business.
King admitted to willfully aiding and counseling a taxpayer in preparing and presenting a fraudulent income tax return to the IRS. The 2005 tax return falsely claimed Schedule A and Schedule C expenses that King knew were not valid.
In the mortgage fraud case, King admitted that from October 2005 to July 2006, she assisted other defendants to submit false documentation in support of loan applications in order to defraud mortgage lenders. During this time period, King was a tax return preparer and owned the Tax Kings, a tax return business in Bakersfield. King prepared and provided to her co-defendants false and misleading verification letters that purported to verify loan applicants’ self-employment history and income, among other information. King also falsely claimed to be a CPA. King received compensation payments from the co-defendants for providing the verification letters.
King was ordered to pay $530,300 in restitution to the victim lenders in the mortgage fraud case and to pay $174,002 in restitution to the IRS in the tax case. King will also serve three years of supervised release upon her release from prison. The remaining four defendants in the mortgage fraud case have pleaded not guilty. (usattyedeca42312)
MORAL
Like I said before, the prosecutors are proceeding south with a vengeance. Note the dates that the criminal events occurred.
CALIFORNIA MAN GETS 25 YEARS TO LIFE IN PRISON FOR MORTGAGE FRAUD
FACTS
On April 27, Timothy Barnett was sentenced to in Orange County Superior Court by Judge Stephen A. Marcus to 25 years to life in prison for swindling elderly people out of their homes after promising to help them avoid foreclosures. This was during 2005 to 2007. He was convicted in March 2012 for 17 felonies for tricking five people into unknowingly granting him title to their homes. He had been convicted previously of two prior burglary felonies in the 1990s. Because this was his third felony the judge sentenced him severely. Under California law a person can be convicted of burglary if he or she enters someone’s home with the intent to commit a crime. Thus going into a person’s home to do a mortgage loan with the intent to defraud such as taking the application and having the intent to alter the numbers as one example is burglary under state law and this is a state not a federal conviction. (lat42512p1,p10)
MORAL
It is better to see your attorney before law enforcement if anyone was involved with creative loans, especially from 2006 to the present.
CALIFORNIA MAN DRAWS OVER 10 YEARS IN PRISON FOR MORTGAGE FRAUD
FACTS
On April 16, Scott Dority of San Marino was sentenced to 121 months in federal prison for defrauding banks and other lenders by using straw borrowers and bogus documents to obtain millions of dollars in loans for houses and high-end vehicles that included Ferraris and Lamborghinis.
Dority pleaded guilty previously to wire fraud, conspiracy, aggravated identity theft and two counts of tax evasion. When he pleaded guilty, he admitted that his fraudulent conduct caused at least $4 million in losses to financial institutions that issued mortgages and approximately $5 million in losses to institutions that issue loans for the sports cars and recreational vehicles. Dority also admitted in court that he failed to file tax returns for 2005 and 2006, even though he had hundreds of thousands of dollars in income in each of those years.
Dority, along with others, recruited individuals with good credit to act as straw buyers to purchase residential homes or expensive vehicles. Dority created a package of materials—including fake bank statements, fake pay stubs and bogus fake tax returns—to make it appear that these straw buyers had sufficient assets and income to pay back loans used to purchase the real estate and vehicles. These fake documents were then submitted to lenders who relied upon them to issue more than $9 million in mortgage and vehicle loans.
As part of the 121-month prison sentence, Dority received a mandatory two-year prison term for aggravated identity theft. (usattycdca42312)
MORAL
Since April 23 was Shakespeare’s birthday, did he say or write “Woe is me?" Because Mr. Dority sure can use that phrase now.
SIX PEOPLE FACE FEDERAL WIRE FRAUD CHARGES IN CALIFORNIA FOR REAL ESTATE FLIPPING SCHEME THAT COST VICTIMS MORE THAN $4 MILLION
FACTS
Federal prosecutors have charged six people in relation to a multi-million dollar real estate flipping scheme in which investors were promised title to homes that could be easily resold, but in fact did not have “clean” titles, were uninhabitable, or were simply worthless.
According to an indictment returned by a federal grand jury on April 18, the six defendants participated in a real estate scheme in which they sold victims real estate owned properties for as much as $45,000. Even though the defendants had paid less than $10,000 per property, they told buyers that the properties were valuable and could be resold or flipped for a profit within a year.
During a scheme that ran from mid-2009 through mid-2010, victims were promised that the properties came with clean titles, property management services and guaranteed rentals for the first three months, according to the indictment. Furthermore, the defendants allegedly claimed they had an “exit strategy” in which buyers could choose to sell the properties back to them for $60,000.
In some cases, victims did not receive the properties because they simply did not exist. In other cases, the properties were condemned or other issues with the titles meant victims were not able to take control of the properties. Of those victims who did receive titles, some found that the titles were encumbered by tax liens, fines or building code violations. Furthermore, the indictment alleges that investor funds were immediately disbursed upon receipt, rather than being held in escrow. The indictment alleges that there are more than three dozen victims with losses of at least $4.2 million.
The defendants solicited investors at seminars held in Irvine and Costa Mesa, Calif., Orlando and Dallas, plus in webinars conducted on the Internet.
The six people indicted are Sylvia Melkonian, Laguna Beach, Calif.; Sheridan Snyder, Turtletown, Tenn.; Andrew Wardein, Irvine, Calif.; Craig Shults, Huntington Beach, Calif.; Paul Licausi, Fort Pierce, Fla.; and Joseph Haymore, Port St. Lucie, Fla.
All of the defendants named in the indictment are named in at least five counts of wire fraud. If they are convicted, each defendant would face statutory maximum sentences of at least 100 years in federal prison. (usattycacd42312)
MORAL
I warned you they were cracking down on Southern California now. We will see what comes next.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
