WE’RE HEARING from the U.S. Court of Appeals, Seventh Circuit, where not one but two cases involving the same Wisconsin mortgage broker were decided. “Top of the world Ma” as James Cagney once said in the movies. The mortgage broker in question was serving a 51-month sentence for mortgage fraud. To try and reduce his sentence the broker agreed to testify against some of his former mortgage loan borrower customers.
They take mortgage fraud seriously enough in Wisconsin to prosecute loan borrowers for “liar loans” as quoted by the court. Nothing like being convicted of a federal crime to enhance the rest of your employment career. This may have been a reason that the loan borrower actually pushed the envelope so far as to appeal their convictions to a federal appellate court. Another reason was that they were ordered to pay $66,377 in restitution. Too bad for them that the mortgage broker was happy to “roll over” (my quote) on them to try and get his sentence reduced.
The case in question on appeal, United States of America v. Johnson and Gray, involved an evidentiary technicality. The defendants wanted to introduce into evidence the mortgage broker’s history of “duping innocent borrowers.” This was sort of a defense akin to the mortgage broker made me do it. Although the court referred to the mortgage broker as “shady” and a “serial fraudster” the court denied borrower and her friend’s request.
The court spent a lot of time discussing the facts of the case and the borrower and her friend’s culpability. The borrower wanted to buy a home with her boyfriend but his credit was bad. The borrower tried to get a loan with her brother but that was denied. The borrower then got an email from her friend who offered to be a co borrower as long as the friend only stayed on the loan for two years. The friend was to receive a finder’s fee from a general contractor who was the daughter of the builder seller. As convoluted as this sounds it was probably not that untypical from back in the day.
If you are reading this story you were probably one of the smart and or lucky ones who ran away when approached by a potential customer with this fact pattern. But enough about fraud and perhaps in this case justice applied to a loan borrower. Now we turn to the great state of California where just a few weeks ago the state started a program to help teachers buy a home and two other first-time homebuyer loan programs.
Known as the Extra Credit Teacher Home Purchase Program the state is providing a deferred payment forgivable interest subordinate loan to teachers and certain other school employees who work in high priority schools. The ECTP funds can be used for downpayment assistance. The two other programs are FHA insured first mortgage loans. One of those programs also comes with down payment assistance up to 3.5% of the FHA first loan. If you are a California broker or LO you should check these programs out since they could help you get some deals closed.
Lastly we swing over to the East Coast and visit New York where a bill was introduced into the State Senate (5923-2013) that will require title agents to become licensed. Along with the licensing privilege will be the payment of fees and a continuing education requirement of 15 hours every two years. Sounds familiar doesn’t it?
Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at
