WATCH OUT FOR “BROKER OFFICE SURVEYS” BY CALIFORNIA DRE
FACTS
The California Department of Real Estate has issued an internal directive to start broker office surveys in 2013. A BOS includes unannounced and unscheduled visits to brokers' offices and an audit of random files that the DRE requests. With this change, brokers will now need to be ready at a moment's notice for a surprise visit from the DRE
It is anticipated that the DRE will ask to see records from different transactions or random transaction files upon the visit.
BOS are conducted by enforcement special investigators to review specific issues and documentation in multiple transactions to evaluate a broker’s business practices and their compliance with the Real Estate Law. Surveys do not include an in depth examination of the trust fund handling or finance related compliance issues, which are best performed by auditors. If a broker office survey identifies potential trust fund or financial related noncompliance, an audit is requested for detailed DRE examination.
Audits are financial compliance examinations. The central focus of an audit is on trust fund handling by the licensee and examination and reconciliation of the trust accounts maintained to assure that investor/client monies are handled and accounted for properly. However, audits also focus on compliance with financial related laws and regulations such as predatory lending, multi-lender law, private money reporting (threshold broker), broker escrow laws, subdivider assessment payments, and other money related issues.
Auditors will also examine licenses, record s and files for compliance with the Real Estate Law and Commissioner’s Regulations related to licensing, disclosure, recording of interests and other issues. Audit reports are issued to the Enforcement section for decision on what action should be taken.
As to cost recovery, the Department charges for those audits that relate to substantiating trust fund mishandling by a real estate broker provided the violation is subsequently proven and results in some form of disciplinary action. The Department may also bill the licensee for follow-up compliance audits. (dre2011annalrprtcommrp21)
MORAL
If you are selected for a survey audit there has to be a reason. So self-audit or have us do it first, before DRE.
ANOTHER WAY TO SUE FOR WRONGFUL FORECLOSURE IN CALIFORNIA
FACTS
Arden M. Intengan appealed a judgment of dismissal. Essentially, Intengan sought to preclude respondents from foreclosing on her property, contending they lack authority to do so under the relevant deed of trust and notice of default. Intengan argued she alleged facts sufficient to state a cause of action, including a claim based on respondents’ alleged failure to contact her or attempt with due diligence to contact her before recording the notice of default..
The judgement is reversed. The Courts of Appeal concluded that judicial notice could not be taken of respondents’ compliance with Civil Code section 2923.5, and Intengan’s allegations that respondents did not comply with the statute were sufficient to state a cause of action for wrongful foreclosure.
A statement purportedly accompanying the notice of default was a declaration by Samantha Jones, “MLO Loan Servicing Specialist of BAC Home Loans Servicing, LP,” in which she states under penalty of perjury that Bank of America “tried with due diligence to contact the borrower in accordance with California Civil Code Section 2923.5.” The declaration does not provide any facts to support this conclusion, such as the specifics of any attempt to contact Intengan. Intengan v. BAC Home Loans Servicing, LP., et al., A135782, San Mateo County, Sup. Ct. Civ 595111, 1st App. Dist.)
MORAL
A bald statement without facts allows the consumer to stop the foreclosure by filing a complaint that there are no facts stating when, where, or how the consumer contact was attempted. If the consumer denies this then there is a trial on the facts and the consumer stays at home a lot longer. Biggest problem? Most consumers cannot afford to sue.
CALIFORNIA MAN FACING MORTGAGE FRAUD CHARGES
FACTS
On March 25, a three-count indictment was handed down naming Alexander A. Romaniolis. According to Lauren Horwood of the U.S. Attorney's Office in Sacramento, Romaniolis "recruited five straw buyers to purchase eight California residential properties in Roseville, Rocklin and San Clemente" and then helped those straw buyers provide false information to lenders about their income, assets and job statuses. Horwood said the purpose of Romaniolis's alleged fraud was to get the individuals posing as straw buyers living in the residences while they claimed to be executives working for a corporation owned by Romaniolis.
"All of the properties were foreclosed on, resulting in a total loss of $2 million," according to Harwood. (prstribrose32513)
COLORADO LAW ON LOAN SERVICING CHANGES AS TO NOTIFICATION OF LOAN MODIFICATIONS TO SERVICERS THAT TAKE OVER THE LOAN
FACTS
Adds to Colorado Revised Statutes 38-40-103.5. Notice upon transfer of servicing rights–prior servicer's offer to borrower survives transfer.
MORAL
Be certain to give traceable notice at time of transfer to the successor loan servicer. Failure to do so allows the borrower to sue, collect statutory damages and attorney fees. Worse yet both servicers would probably be sued and each would probably sue the other for indemnity. Give then notice. For further information read the section or give me a call if you would like clarification.
NEW MEXICO REAL ESTATE BROKER GUILTY OF MORTGAGE FRAUD
FACTS
On March 27, a federal jury returned a guilty verdict against Keith Michael Courtney on wire fraud charges after a three-day trial.
Courtney and co-defendant John Johns were indicted in November 2011 on wire fraud charges. The three-count indictment alleged that between November 2006 and September 2007, Courtney and Johns schemed to defraud mortgage lenders by using straw buyers to apply for residential mortgage loans. At the time of the offenses charged, Courtney was part owner of Black Diamond Contruction Co., Veritas Mortgage Co., and Polaris Realty, all of which maintained offices in Albuquerque. Johns was a loan officer with Veritas Mortgage.
In February 2012, Johns entered a guilty plea to the indictment. During his plea hearing, Johns admitted his role in the unlawful scheme alleged in the indictment which resulted in three wire transfers of funds in the aggregate amount of $1,601,775.84 by mortgage lenders based on false and fraudulent representations made in connection with the sale of two residences built by Courtney’s business, BDCC.
Courtney proceeded to trial which began on March 25. The evidence at trial showed that Courtney’s company, BDCC, built two houses, one in Albuquerque and the other in Santa Fe. After the houses were completed, Courtney and Johns solicited straw buyers to purchase the houses, using the names and credit histories of the straw buyers to obtain financing from Plaza Home Mortgage Co. and Lehman Brothers Bank. The loan applications falsely stated that the borrowers were buying the houses as primary residences, when, in fact, they had no intention of ever living in the houses. The straw buyers put no money into the transactions, did not make the mortgage payments, and were to receive $5,000 once the houses were resold. They were told that Courtney would make the mortgage payments until the houses were resold.
As a result of the false loan applications, which did not inform the lenders that the borrowers were straw borrowers, Plaza Home Mortgage wired two loans for $660,772.50 and $99,250 in connection with the Albuquerque house. Lehman Brothers Bank wired $641,803.34 for a loan in connection with the Santa Fe house. Courtney obtained an aggregate of $1,601,775.84 from the two mortgage lenders based on the fraudulent transactions. Courtney made mortgage payments on each property for a time after the transactions closed but ultimately stopped making payments on both, at which point the houses went into foreclosure. The mortgage companies suffered losses as a result.
The jury deliberated approximately two-and-a-half hours before returning a guilty verdict on all three counts in the indictment.
At sentencing, Courtney faces a maximum penalty of 20 years in prison and a $250,000 fine on each of the three wire fraud counts of conviction. Johns faces the same maximum penalties. (usatttynm32813)
MORAL
Here the federal prosecutors went back eight years. Anyone want to venture a guess as to whether Johns testified against Courtney?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
