FACTS
ML 11-02 –Quality Control Plans must be updated. QC plans must now provide for monitoring third party originators and underwriters. Review must include thresholds based on volume, past experience and other factors as set forth in 4060.1 Rev 2, Para. 7-6. QC Plan must include methodology of review, results and corrective actions taken. Sponsors to provide report of review and follow-up including findings, action taken along with procedural information such as percentage of loans reviewed, selection process of loans, identify person conducting review. Save report for two years. All TPO loans in default within first six payments must be reviewed within 45 days of loan being reported 60 days past due. Review reports and action taken. Rejected applications reviewed within 90 days for the end of month in which the decision made.
ML 11-04-HUD will capture the unique identifiers from the NMLS&R.
ML 11-05 Audited financials are revised. Submit electronically within 90 days of fiscal year end.
MORAL
This is not everything. Nor is it the complete mortgagee letter in each case. It is a reminder of areas you might forget.
FORMER CHASE BANK OFFICIAL WORKING IN LOSS MITIGATION CONVICTED OF TAKING BRIBES AND DISCLOSING EXISTENCE OF SUSPICIOUS ACTIVITY REPORT
FACTS
On Jan, 10, Frank E. Mendoza of Victorville, Calif., a former official with Chase Bank, has been found guilty of disclosing the existence of a Suspicious Activity Report filed with federal officials, and then soliciting thousands of dollars in bribes to help the borrower deal with a possible criminal investigation related to the illegally disclosed SAR. He was convicted of three counts of bank bribery and one count of unlawfully disclosing a SAR.
The jury determined that Mendoza demanded a $25,000 bribe, ultimately accepted $10,000 in bribes from the customer, and disclosed the existence of a SAR. The evidence presented during the trial showed that Mendoza, who worked as a loss mitigation specialist for Chase Bank, conducted an investigation of a delinquent borrower on mortgage loans made in relation to seven properties in Palmdale. In the fall of 2008, Mendoza reported to Chase that he suspected fraud in relation to the mortgages, and the bank in late November 2008 filed a SAR with FinCEN.
Several months later, Mendoza approached the borrower and suggested that he pay $25,000 in exchange for Mendoza’s assistance with Chase and a possible federal criminal investigation related to the loans. In these conversations, Mendoza disclosed the filing of the SAR and asserted that a federal criminal investigation of the borrower was imminent. Mendoza’s bribery solicitation in May 2009 caused the borrower to contact the FBI. After the borrower delayed paying any bribe money, Mendoza ultimately agreed to accept $10,000 in cash. During two meetings in the borrower’s car in the parking lot of the Mall of Victor Valley, the borrower made two $5,000 payments to Mendoza. Following the second payment on June 29, 2009, special agents with the FBI arrested Mendoza, recovered the second $5,000 payment, and recovered from Mendoza’s wallet two $100 bills that were part of the first bribe payment.
Mendoza is scheduled to be sentenced by United States District Judge Robert H. Whaley on May 25. Mendoza faces a statutory maximum penalty of 95 years in federal prison. “Suspicious Activity Reports filed by financial institutions with FinCEN provide some of the most useful information available to government authorities in criminal, tax or regulatory investigations or proceedings,” according to FinCEN director James H. Freis Jr. “This flow of highly confidential information among financial professionals, FinCEN, and law enforcement depends on the training and trust placed on industry and government officials alike. This case demonstrates the severe consequences that come with betraying that trust, disregarding the Bank Secrecy Act, and ignoring one’s duty as an employee of a financial institution.”
The Bank Secrecy Act and FinCEN regulations require certain financial institutions, including all banks, to report suspicious transactions and large currency transactions. FinCEN receives approximately 1 million SARs every year. (usattycdca11111)
MORAL
Over the years I have explained SAR reports to many of you. The banks and financial institutions just have to be suspicious there is loan fraud. They do not have to be right. They have total immunity even if they are wrong. So if a loan looks suspicious they are required to make the SAR reports to various agencies including the FBI in the district where it occurred, Secret Service where appropriate and other law enforcement agencies. A weekly report is given to each agency and they decide which ones to investigate. That is why the report is secret and why the ex-bank employee is convicted over going to the borrower that had seven loans that looked suspicious. The funny part is the ex-Chase employee appears to be the one that caused the SAR Report to be generated and then went out and attempted to get bribery money from the very person he reported.
SAN DIEGO FEDERAL COURT SENTENCES FOUR OF 19 DEFENDANTS IN MASSIVE MORTGAGE FRAUD SCHEME
FACTS
On Feb. 18, four defendants who were convicted in connection with a $55 million mortgage fraud scheme were sentenced. The four, Maria Echeverria, Ivan Gil, Laneka Chatton and Jonathan J. Garcia were among 19 defendants named in a 51-count indictment that alleges wire fraud, mail fraud, and criminal forfeiture.
From about 2004 to about 2007, each of the four defendants sentenced made false statements in various loan applications and supporting documents in order to trick lenders into giving residential mortgage loans to unqualified or under-qualified borrowers. The defendants falsified borrowers' income and employment to make them appear as if they would represent a good investment candidate for the lender. Defendants also misled the lenders by purchasing false "CPA letters" from Aguilera Bookkeeping and Income Tax, which was located in Vista, Calif. These false CPA letters purported to verify that the borrower was successfully self-employed. It is alleged that the defendants fraudulently induced banks and lending institutions to make over $55 million in home loans, and received over $1.05 million in fees and commissions.
United States District Court JUDGE JEFFREY T. MILLER REMARKED UPON THE SERIOUSNESS OF THE CRIMES IN THIS CASE AND THE NEED TO BOTH PUNISH DEFENDANTS FOR THEIR CRIMINAL CONDUCT AND TO AFFORD ADEQUATE DETERRENCE FOR OTHERS WHO MIGHT ENGAGE IN MORTGAGE FRAUD. Judge Miller then imposed custodial sentences upon all four defendants. He imposed a sentence of 18 months for Jonathan J. Garcia. Garcia previously pled guilty to one count of making false statements to a federally insured institution, in violation of Title 18, United States Code, Section 1014. Garcia and CO-DEFENDANTS LANEKA CHATTON, KAREN GARCIA, AND FRANCISCO GIRON WORKED AT GIRON'S FINANCIAL & REALTY GROUP IN OCEANSIDE, CALIF. Jonathan Garcia was involved in 32 fraudulent loan applications, representing approximately $7 million in fraudulent loans, and which resulted in losses of between $400,000 and $1 million when the borrowers defaulted, the loans were foreclosed, and the properties were sold.
Judge Miller also imposed a SENTENCE OF 12 MONTHS AND ONE DAY FOR MARIA ECHEVERRIA. Echeverria pled guilty to two counts of wire fraud in violation of Title 18, United States Code, Section 1343. Echeverria owned a mortgage company called AmStar Funding in Vista. Echeverria admitted that she engaged in fraud in at least nine loan applications, representing approximately $3 million in fraudulent loans, and which resulted in losses of at least $526,000 when the borrowers defaulted, the loans were foreclosed, and the properties were sold.
Judge Miller imposed a SENTENCE OF 12 MONTHS UPON IVAN GIL. Gil previously pled guilty to four counts of making false statements to a federally insured institution. Gil worked at Dream Homes and Loans, a mortgage and real estate company in Vista. Gil admitted that he engaged in fraud in at least 12 loan applications, representing approximately $2.2 million in fraudulent loans, and which resulted in losses of $200,000 to $400,000 when the borrowers defaulted, the loans were foreclosed, and the properties were sold.
Judge Miller imposed a sentence of 12 MONTHS UPON LANEKA CHATTON. Chatton previously pled guilty to one count of wire fraud in violation of Title 18, United States Code, Section 1343. Chatton also worked at Giron's Financial & Realty Group in Oceanside, Calif. Chatton admitted that she engaged in fraud in at least four loan applications, representing approximately $800,000 in fraudulent loans, which resulted in losses of approximately $130,000 when the borrowers defaulted, the loans were foreclosed, and the properties were sold. (usattysdca21811)
MORAL
Notice that the time period of all the loans is during the era of no docs, no assets and no income documentation required to prove the income and assets. Now the federal prosecutors are chasing all the loan officers involved in these types of loans and where the income is way off, they instigate criminal prosecution. In addition, the lenders are being asked by the investors to pay them for any loss and the lenders are now chasing and suing the brokers individually as well as the corporation. I have explained the legal theory to quite a few of you already.
FOURTEEN INDICTED IN FLORIDA FOR MORTGAGE FRAUD
FACTS
On February 25, 2011 fourteen people were indicted on charges of mortgage fraud in a 44-count indictment related to $47 million worth of property in the Sarasota area. The defendants are accused of lying on mortgage applications between October 1997 and March 2008. Most of the 22 properties in question are now in foreclosure. Most of the accused were involved in buying and reselling property for profit. There are 200 mortgages involved, 65 loans and 50 bank accounts.
The fraudulent activities allegedly involved 22 residential properties in Sarasota, involving more than $47 million in loans. The defendants are:
R. CRAIG ADAMS, 43, OF SARASOTA, who was previously employed as a real estate agent working principally in the Sarasota area, Adams also acted as a mortgage broker from time to time, and bought and sold residential real property in Sarasota on his own account.
RICHARD J. BOBKA, 41, OF SARASOTA, who was likewise previously employed as a real estate agent working principally in the Sarasota area. Bobka, like Adams, also acted a mortgage broker from time to time, and bought and sold residential real property in Sarasota on his own account as well.
GEORGE R. BOBKA, SR., 75, OF SARASOTA, the father of co-defendants Richard J. Bobka and George R. Cavallo, who bought and sold residential real property in the Sarasota area through co-defendants R. Craig Adams and Richard J. Bobka.
GEORGE R. CAVALLO, 45, OF KIRKLAND, WASH, THE HUSBAND OF CO-DEFENDANT PAULA L. HORNBERGER, who also bought and sold residential real property in the Sarasota area through co-defendants R. Craig Adams and Richard J. Bobka.
PAULA L. HORNBERGER, 40, OF KIRKLAND, Wash, the wife of co-defendant George R. Cavallo, who likewise bought and sold residential real property in the Sarasota, area through co-defendants R. Craig Adams and Richard J. Bobka.
LISA R. ROTOLO, 47, OF BRADENTON, who was a title agent and OWNER OF DIAMOND TITLE of Sarasota, Inc. in Sarasota, where she worked with co-defendant Bonnie J. Katz.
BONNIE J. KATZ, 58, OF SARASOTA, who was as a settlement or escrow officer employed by co-defendant Lisa R. Rotolo at Diamond Title of Sarasota Inc.
JEFFREY T. BERGHORN, 46, OF BRADENTON, who bought and sold residential real property in the Sarasota area through co-defendants R. Craig Adams and Richard J. Bobka.
THOMAS M. BRUSTAD, 41, OF SARASOTA, who also bought and sold residential real property in the Sarasota area through co-defendants R. Craig Adams and Richard J. Bobka.
JOSEPH J. DIROCCO, 41, OF SARASOTA, who likewise bought and sold residential real property in the Sarasota area through co-defendants R. Craig Adams and Richard J. Bobka.
JONATHAN L. GLUCKER, 43, OF SARASOTA, the husband of co-defendant Heather L. Kabobel, who was previously employed as a loan officer for several mortgage brokers.
HEATHER L. KABOBEL, 39, OF SARASOTA, the wife of co-defendant Jonathan L. Glucker, who was employed as an appraiser.
DEREK W. LUTHER, 40, OF SARASOTA, who bought and sold residential real property in the Sarasota area through co-defendants R. Craig Adams and Richard J. Bobka.
JOEL A. STREINZ, 52, OF NOKOMIS, who bought and sold residential real property in the Sarasota, area through co-defendants R. Craig Adams and Richard J. Bobka.
Allegedly a confidential informant approached the FBI in May 2008 to expose the fraud ring. The informant said he or she participated in more than 80 fraudulent mortgage transactions in the Sarasota area between January 2001 and April 2007, with the properties valued at more than $200 million.
Of those, the informant said Rotolo was the Bradenton title officer involved in 61 fraudulent mortgages totaling nearly $50.6 million on three dozen properties, court records show.
The unidentified informant, meanwhile, has agreed to plead guilty to one count of conspiracy, according to court records. The Sarasota case spanned over 10 years, from at least October 1997 and March 2008, in which the 14 defendants made false statements regarding the real seller and buyer in the property transaction, the property’s real sale price and the buyer’s income, assets and liabilities to obtain loans from nearly 12 banks and private mortgage lenders in the area.
The defendants face a maximum of five years in federal prison and a fine of $1 million for a conspiracy violation, and up to 30 years in prison and a fine of $1 million for falsifying documents in connection with a loan. sarasotapatchtpo.comBradenton.com22611)
MORAL
Did you notice how the federal prosecutors went back to 1997? THAT IS 10 YEARS AGO FOR 14 DEFENDANTS. And it is not over yet. Lenders are suing or threatening to sue brokers and borrowers in force and the federal prosecutors going in the fallout on this is continuing to grow. Lenders are making up for their losses now by suing or threatening to sue borrowers and brokers as some of you are painfully aware.
GUILTY PLEAS ENTERED AGAINST BORROWERS FOR SUBMITTING FRAUDULENT INFORMATION OF THEIR LOAN APPLICATIONS
FACTS
On Feb. 15, MELODY C. REDONDO AND PAUL G. REDONDO, BOTH OF ERIDIAN, IDAHO, entered guilty pleas in U.S. District Court in Boise. Melody Redondo pleaded guilty to making a false statement to a financial institution, a felony. Paul Redondo pleaded guilty to misdemeanor theft from a financial institution.
Melody Redondo admitted that IN JULY 2007, SHE SUBMITTED A FALSE APPLICATION to obtain financing from Washington Mutual Bank on a $200,000 loan. Redondo represented on the loan application that she had monthly gross income of $13,000; however, her total income in 2007 was substantially less. Redondo submitted the loan application to Washington Mutual Bank to obtain a home equity line of credit. The bank relied upon the loan application, which contained the defendant's materially false statement, and authorized funding of the loan. The charge of making a false statement to a financial institution is punishable by a term of imprisonment of 30 years, a term of supervised release of up to five years, and a maximum fine of $1 million.
PAUL REDONDO admitted that in August 2007, he SUBMITTED A CONSUMER LOAN APPLICATION TO OBTAIN FINANCING ON A $100,000 HOME EQUITY LINE OF CREDIT on a home in Eagle. He also admitted to falsely representing his monthly gross income on the loan application that was submitted to Washington Trust Bank. Misdemeanor theft from a financial institution carries a maximum punishment of one year in prison, a $100,000 fine, and a term of supervised release of not more than one year.
Sentencing for Melody Redondo is scheduled for May 3, before Chief U.S. District Judge B. Lynn Winmill in Boise. Sentencing for Paul Redondo is scheduled for May 4, before U.S. Magistrate Judge Ronald E. Bush.
The case is part of the ongoing CRESTWOOD MORTGAGE FRAUD CASE, which involved multiple defendants who bought and sold real estate in order to "flip" it, or gain profits from the sales. The financial institutions and mortgage lenders incurred losses of approximately $1.6 million dollars.
To date, EIGHT OTHER PEOPLE HAVE BEEN SENTENCED OR PLEADED GUILTY IN THE CASE: MICHAEL J. HYMAS, formerly of Boise, was sentenced to 21 months in federal prison for wire fraud and ordered to pay $544,647 in restitution; SHAUNTEE K. FERGUSON, of Boise, was sentenced to probation for five years, 80 hours of community service, and ordered to pay $365,829.69 in restitution for making a false statement to a financial institution; CHRISTOPHER R. GEORGESON, formerly of Boise, currently of Phoenix, was sentenced to one month in federal prison for wire fraud and ordered to pay $103,356.64 in restitution; STANLEY J. FERGUSON, of Boise, was sentenced to 12 months plus one day in federal prison and ordered to pay $676,826 in restitution; and BRENT BETHERS, of Eagle, was sentenced to one month in federal prison for wire fraud, ordered to pay $23,913 in restitution, and fined $6,000.
TRAVIS HYMAS, formerly of the Boise area, currently of Cedar Hills, Utah, pleaded guilty to false statement to a bank in March 2010. SHANE HYMAS AND LAURIE KRECHELLE HYMAS, both formerly of the Boise area, currently of American Fork, Utah, pleaded guilty to bank fraud in April 2010. Sentencings for all three have been rescheduled to April 11, in Boise before U.S. District Judge Edward J. Lodge. Each faces a maximum sentence of 30 years in federal prison, a fine of up to $1 million, and supervised release of up to five years. (usattyidaho21511)
MORAL
I have been lecturing for years about false information on loan applications including but not limited to 1003’s and 1009’s. THE MERE SUBMISSION OF THE FALSE LOAN APPLICATION to the federal lender completes the felony. The loan does not have to fund. This is why in my opinion so many of the prosecutions go back to loans that were made in 2007 and earlier. These were the days of stated income and stated asset loans. The federal prosecutors are honing in on these loans in my opinion because it is very easy to prove. The borrower then brings in the loan officer as a co=conspirator and the chain goes on and on.
MICHIGAN HOME BUILDER GETS PRISON FOR MORTGAGE FRAUD
FACTS
On Feb. 22, GIUSEPPE CRACCHIOLO OF ROMEO, MICH., was found guilty of wire fraud and sentenced for his role in a mortgage fraud scheme to six months’ imprisonment, followed by three years’ supervised release. United States District Judge George Caram Steeh also ordered Cracchiolo to serve an additional six months' home confinement and pay restitution of $1,654,500 to numerous financial institutions.
From 2002 through 2005, ATIIM COLLINS OF DETROIT, OWNER OF EDGEWOOD PROPERTY MANAGEMENT, in Shelby Township, Mich., recruited and paid individuals to act as straw buyers in fraudulent mortgage loan transactions. The scheme to defraud involved homes built by Cracchiolo, through his company, MARK CHRISTIAN INC., in Romeo. The straw buyers generally had good credit ratings, but not enough income, and lacked the qualifications necessary to purchase the properties. TED CARTER OF DETROIT, participated in the conspiracy by creating false documents, including fictitious W-2 forms and pay stubs. These false documents were used by the straw buyers to support the fraudulently inflated asset and income information submitted on their mortgage loan applications. After the loans were approved by the lending companies, Cracchiolo used MCI to receive and disburse the illegally gained proceeds. This scheme to defraud resulted in the approval and disbursement of over $4.1 million in fraudulent mortgage loans.
Cracchiolo admitted that, during the conspiracy, he arranged to have the illegally obtained loan proceeds transferred back to borrowers and others without the knowledge and approval of the lending companies. All of the properties involved in the fraud went into foreclosure resulting in approximately $2.5 million in losses to the lenders.
On Dec. 3, 2010, Carter was sentenced to one year and a day imprisonment, followed by two years’ supervised release. On Dec. 6, 2010, Collins was sentenced to five years’ probation, with one year to be served at a residential reentry center, and six months' home confinement. They must also pay restitution, joint and several, with Cracchiolo. (usattyedmi22211)
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
