FACTS
The verdict was against PHH Mortgage Corp. which does business as Coldwell Banker Mortgage. The jury awarded Staff Sgt. David Brash over $21 million in damages consisting of $1 million in emotional distress damages and $20 MILLION IN PUNITIVE DAMAGES.
Brash bought a home 2007 with a mortgage loan from Coldwell Banker. His monthly mortgage payments were automatically withdrawn from his account each month with no problems. In 2009, he suddenly began receiving late notices from the mortgage company even though his payments were continually taken out of his account on time.
In something that has become all too familiar to consumers all over the country, Brash then embarked on an odyssey of dealing with Coldwell Banker's customer service department which OUTSOURCED MOST OF ITS CALLS TO INDIA. Despite assurances by customer service representatives that the issue had been rectified, the mortgage servicer continued to treat the payments as being late.
Coldwell Banker eventually reported Brash as being late to the major credit reporting agencies. Brash alleged that he was then denied credit based on the negative reporting by his local bank.
Brash sued the mortgage servicer in a Georgia federal court for VIOLATIONS OF THE REAL ESTATE SETTLEMENT AND PROCEDURES ACT, BREACH OF CONTRACT AND NEGLIGENT LOAN SERVICING.
THE JURY AWARDED HIM $1 MILLION FOR THE EMOTIONAL DISTRESS THAT THE SERVICER PUT HIM THROUGH, HIS ATTORNEYS' FEES AND ALSO ORDERED $20 MILLION IN PUNITIVE DAMAGES.
Brash's lawyer told Georgia's WTVM 9: "This soldier was never behind on his payments. They were taking his money and not crediting it properly. I think the jury and everybody have had this experience before with the call center and they're fed up with it. They started to make his credit delinquent. They wrote him letters saying he was behind on his mortgage and it affected his credit. And by affecting his credit, he got turned down for credit cards and was worried he'd get in trouble with the Army."
PHH Corp. issued a statement saying that it takes its responsibilities to borrowers seriously (I just bet it does), but that it believes the verdict is not supported by the facts and that it intends to seek further judicial review of the case.
What is particularly interesting about Brash's case is that the jury was willing to award punitive damages for Coldwell Banker's conduct. Georgia allows punitive damages in cases where there has been intentional and reckless conduct.
MORAL
Goliath just got hit with the slingshot but the appeal awaits since it is relatively certain that PHH will appeal.
FEDERAL TRADE COMMISSION CAUSES $2.2 MILLION TO BE RETURNED TO CONSUMERS ALLEGEDLY DEFRAUDED BY HOME ASSURE, A SO-CALLED MORTGAGE FORECLOSURE RESCUE SERVICE
FACTS
Under a settlement with the Federal Trade Commission, two companies and three individuals are banned from the mortgage relief services business and must relinquish $2.2 million in assets for consumer refunds.
In November 2009, the FTC alleged that KIRKLAND YOUNG LLC AND ITS MANAGER, DAVID BOTTON, misrepresented themselves as consumer mortgage lenders, servicers, or their affiliates, and falsely promised they would modify consumers’ loans and make their mortgage payments more affordable. The court halted the operations and froze the defendants’ assets pending resolution of the case. The following month, THE FTC ADDED BOTTON’S SISTER, APRIL BOTTON KRAWIECKI, THEIR FATHER, SAMY BOTTON, AND ATTORNEY AID LLC AS DEFENDANTS.
In addition to banning the defendants from selling mortgage relief services, the settlement announced APRIL 11 permanently prohibits them from misleading consumers about financial-related goods and services, such as misrepresenting loan or refund terms, affiliation with any person or government entity, and the ability to improve someone’s credit history. The settlement bars the defendants from selling or otherwise disclosing customers’ personal information, enforcing contracts with mortgage relief clients and violating the Telemarketing Sales Rule. The settlement imposes a $6.1 MILLION JUDGMENT THAT WILL BE SUSPENDED WHEN SAMY BOTTON HAS PAID $300,000; DAVID BOTTON HAS SURRENDERED CERTAIN ASSETS, INCLUDING A CONDO, A CAR, AND A BOAT; APRIL BOTTON KRAWIECKI HAS SURRENDERED A CONDO; AND KIRKLAND YOUNG LLC AND ATTORNEY AID LLC HAVE SURRENDERED ALL OF THEIR ASSETS, WORTH $2.2 MILLION.
The FTC recently issued the Mortgage Assistance Relief Services Rule, which BANS PROVIDERS OF MORTGAGE FORECLOSURE RESCUE AND LOAN MODIFICATION SERVICES FROM COLLECTING FEES UNTIL HOMEOWNERS HAVE A WRITTEN OFFER FROM THEIR LENDER OR SERVICER THAT THEY DECIDE IS ACCEPTABLE. Because the defendants’ claims predated the rule, the FTC did not allege any violations of the rule in this case.
The FTC filed the proposed consent order in the U.S. District Court for the Southern District of Florida.
The FTC acknowledges the assistance of the Offices of Attorney General in Florida and Ohio in this matter.
NOTE: The consent order is for settlement purposes only and does not constitute an admission by the defendants that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.
MORAL
This has got to be a first. All the consumers get all their money back! Do not mess with the FTC. That is, without a lawyer. The consent order may not constitute an admission but on the other hand who willingly consents to giving up over $2 million?
OCC, FEDERAL RESERVE SYSTEM, FDIC, OTS NCUA, SEC AND FHFA ARE PROPOSING RULES THAT WILL REQUIRE DISCLOSURE OF INCENTIVE-BASED COMPENSATION BY COVERED FINANCIAL INSTITUTIONS
FACTS
The Office of the Comptroller of the Currency, Treasury, Federal Reserve System, Federal Deposit Insurance Corp., Office of Thrift Supervision, National Credit Union Administration, Securities and Exchange Commission and Federal Housing Finance Agency are proposing rules to implement section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed rule would require the reporting of incentive-based compensation arrangements by a covered financial institution and prohibit incentive-based compensation arrangements at a covered financial institution that provide excessive compensation to executives, certain managers and employees or that could expose the institution to inappropriate risks that could lead to material financial loss. Comments must be received by May 31, 2011.
MORAL
The good news is at the moment it only appears to effect companies governed by the above agencies with at least $1 billion in assets. So most if not all wholesale lenders and mortgage loan originators should be exempt.
ARIZONA ATTORNEY GENERAL HITS GUARDIAN GROUP LLC AND THE TWO OWNERS WITH A JUDGMENT EXCEEDING $27 MILLION.
NOW SEE WHY.
FACTS
On April 5, 2011 Attorney General Tom Horne announced that a default judgment has been entered against a Scottsdale-based mortgage loan firm that had bilked consumers of nearly $4 million. A Maricopa County Superior Court judge entered a default judgment against BRYAN PREHODA AND LUIS BELEVAN who operated GUARDIAN GROUP LLC until the Department of Financial Institutions shut down the business in May 2010 for engaging in unlicensed mortgage broker activities. This was followed by the filing of a lawsuit against the company and its principals by the attorney general in July 2010 accusing them of consumer fraud. To prevent Prehoda and Belevan from harming consumers in the future, the AG obtained an order prohibiting them from engaging in any trade or occupation relating to mortgage loans in Arizona in the future. The judgment also requires Defendants compliance with the Arizona Consumer Fraud Act.
Guardian Group represented it could help struggling homeowners by reducing the principal amount of their mortgage loan. Guardian Group claimed it would negotiate with lenders to purchase a consumer’s note for less than face value and sell the note in an investment package to a third-party investor. Guardian Group then told consumers that it would modify the rate and terms of the consumers’ mortgage loans to reduce the loan principal to 90% of the home’s current market value. After collecting upfront fees of $1,595 from more than 2,495 consumers, however, Guardian Group failed to provide the promised principal reduction program.
The Arizona Department of Financial Institutions effectively shut down Guardian Group in May 2010 by issuing a cease-and-desist order for engaging in unlicensed mortgage broker activities. The order also imposed a civil monetary penalty of $100,000. After hearing, an administrative law judge found that Guardian Group harmed over 2,495 consumers, engaged in misleading or deceptive advertising, and engaged in unlicensed activity. Superintendent Lauren Kingry issued a final decision and order on Feb. 23, 2011, adopting the judge’s recommended decision.
The attorney general's lawsuit specifically alleged:
1. Guardian Group misrepresented the services that a consumer in the Principal Reduction Program could expect to receive and the company’s ability to provide those services.
2. Guardian Group misrepresented to consumers that it had multiple investors prepared to purchase mortgage notes, when no actual investors had ever invested money in the company.
3. Guardian Group falsely told consumers their file would be processed within 60 to 90 days and promised refunds that were never delivered.
The DEFAULT JUDGMENT FURTHER REQUIRES THE GUARDIAN GROUP, PREHODA AND BELEVAN TO PAY CONSUMER RESTITUTION TOTALING $3,979,525, IN ORDER TO REIMBURSE $1,595 TO EACH OF THE 2,495 CONSUMERS. The attorney general also obtained the maximum civil penalties permitted by the Arizona Consumer Fraud Act, which is $10,000 per violation as defined by law. Because Guardian Group collected fees from over 2,495 consumers, the judgment includes a civil penalty award of $24,950,000.
MORAL
I have to admit that is one healthy judgment. HOWEVER, do either of the two people have the assets to pay any part of it? If so, I am sure the Arizona attorney general would like to hear from you about where their assets are located.
MOTHER AND SON IN EL DORADO HILLS, CALIFORNIA, PLEAD GUILTY TO MORTGAGE FRAUD
FACTS
On April 11, 2011 a mother and her son (BETTY GARCIA, 61, and ANTHONY PORTILLO, 41) pleaded guilty to mortgage fraud and a related offense.
Anthony Portillo pleaded guilty to money laundering. His mother, Betty Garcia, pleaded guilty to concealing a felony.
Portillo used his mother's name and credit history to fraudulently obtain a loan to purchase a $2.75 million home in Shingle Springs. He submitted his mother's bank statements, which had been falsified to show large account balances ranging from $700,000 to $1 million, to secure the loan. When federal agents asked Garcia about the large balances, she falsely claimed that she had earned a very large income.
The defendants are scheduled for sentencing June 27 by federal district court Judge William Shubb. The maximum penalty for money laundering is 10 years in prison and a $250,000 fine.
The maximum penalty for a felony is three years in prison and a $250,000 fine.
MORAL
It would appear superficially, the son steals his mother’s identity and then has her get in trouble by backing him up to try and protect her son. If I am wrong, I am sorry. If I am right, some son.
CONNECTICUT ATTORNEY PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On April 15 JOHN BRYK, 61, of Trumbull, waived his right to indictment and pleaded guilty before United States District Judge Janet C. Hall in Bridgeport to one count of conspiracy to MAKE A FALSE STATEMENT IN A DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT TRANSACTION.
A Department of Housing and Urban Development Uniform Settlement Statement (HUD-1) is an official financial statement reflecting how money is to be distributed at real estate closing.
In JANUARY 2007, BRYK WAS RETAINED BY HEATHER BLISS to be her attorney for the purchase of 87 Saugatuck Ave. in Westport. BRYK was informed by Bliss and her husband that the property purchase would be financed by a $350,000 primary mortgage from Argent Mortgages, as well as a seller-financed mortgage for the remainder of the purchase price. BRYK was subsequently informed that Argent Mortgages would not finance the Saugatuck Avenue property purchase if any other loans were taken on the property. However, BRYK was asked to make the deal go through as planned. BRYK THEN PREPARED THE HUD-1 FOR THE CLOSING ON THE PURCHASE OF 87 SAUGATUCK AVE., WHICH FALSELY INDICATED THAT NO OTHER LOANS WERE USED TO PURCHASE THE PROPERTY.
Judge Hall has scheduled sentencing for July 1, 2011, at which time BRYK faces a maximum term of imprisonment of five years.
On July 30, 2010, HEATHER BLISS PLEADED GUILTY to one count of conspiracy to commit wire fraud stemming from her participation in this and other fraudulent mortgage transactions. She awaits sentencing.
MORAL
One attorney, one buyer, one fraudulent HUD-1 and one potential disbarment coming up aside from the potential prison sentient. Just for one loan he will undoubtedly lose his license as well as being convicted of a felony.
OKLAHOMA CITY FEDERAL JURY FINDS MAN GUILTY OF MORTGAGE FRAUD
FACTS
On April 14, 2011, a jury found DERRICK REUBEN SMITH, 46, of Midwest City, guilty of conspiracy to commit wire fraud in connection with mortgage loans. The jury returned its verdict after four days of trial.
Smith recruited two individuals to buy two new homes in the Raintree Acres Addition in Edmond in mid-2006 and early 2007. The homes sold for $425,000 and $435,000. The evidence at trial showed that the builder of both homes—DODSON CUSTOM HOMES LLC—agreed that T&T REALTY, a real estate brokerage operated by TRINA TAHIR, would receive large commissions and bonuses totaling $51,950 and $77,950. After the closings, T&T Realty wrote checks to MICHAEL GIPSON, an agent at T&T Realty, for $27,059.86 and $58,000. Gipson then wrote checks in those same amounts to “MP SERVICE,” a business that Smith operated. In short, Smith induced lenders to fund mortgages based on inflated real estate prices and misrepresented the distribution of excessive loan proceeds to himself as commissions and bonuses paid to T&T Realty. The houses ultimately went into foreclosure. Each sold for over $100,000 less than the inflated loans that Smith had the buyers receive.
On one of the houses, Smith and Dodson Custom Homes agreed to a $21,250 seller-carry second mortgage that was released without any payments shortly after closing. The jury also heard that for the downpayment on one of the houses, Smith borrowed $28,042.42 from an acquaintance and paid the loan back immediately after closing, even though he knew that the loan application stated that none of the downpayment would be borrowed. The evidence included altered bank statements that Smith had submitted to a lender to support income figures for one of the loan applications.
At sentencing, Smith faces a maximum punishment of 20 years in prison and a fine of $250,000. He will also owe restitution to victim lenders and be subject to forfeiture.
Two co-defendants entered guilty pleas before trial. On April 6, Trina Tahir pleaded guilty to money laundering in connection with a property that Gipson purchased in May 2006. She admitted that she provided Gipson with downpayment assistance through an intermediary company and received the money back right after the closing. The transaction involved money laundering because, as Tahir acknowledged during her plea hearing, it concealed the downpayment assistance and allowed Gipson to present the downpayment at closing as if it were his own money. Tahir faces a maximum punishment of 20 years in prison and a fine of $500,000, in addition to restitution and forfeiture.
On March 30, Gipson pled guilty to conspiracy and money laundering. Gipson also faces a maximum punishment of 20 years in prison and a fine of $500,000, in addition to restitution and forfeiture.
These convictions are the result of an investigation conducted by the Criminal Investigation Division of the Internal Revenue Service and the Federal Bureau of Investigation.
MORAL
Loan the borrower the downpayment. Get “busted” for money laundering when the borrower signs the statement in the loan process that the money is his own and not a loan. Lose the money, forfeit property. Does not sound like a good investment to me. Do you know why the IRS is involved in the great majority of these cases? It is because they know the people involved did not declare the proceeds on their tax returns even before they investigate. It is a good bet on their part based upon my experience.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
