FACTS
The Federal Reserve Board does not want to back down on its loan officer compensation rule despite congressional requests and industry lawsuits to delay the April 1 effective date. The FRB has taken a hard line on compliance issues and repeatedly rejected industry proposals that would allow more flexibility. In particular, the central bank has taken a hard line when it comes to compensating branch managers who originate loans, ruling they must be paid like other LOs and cannot participate in profit sharing plans.
The FRB's standard is so tight that even "nonproducing" managers can run afoul of the rule if they pitch in during crush times and originate a loan. At many companies branch managers also are top producers, earning a high level of compensation. Going forward, banks and mortgage companies are likely to pay these managers a salary and bonuses based on their individual loan volume or other allowable criteria.
But there are concerns that lenders will make adjustments so branch managers don't see a reduction in pay. Companies will have to be careful that those adjustments aren't a proxy for profit sharing and violate the Truth in Lending Act rule.
FRB staffers also made it clear during the webinar that a company can offer different pay scales. For example, one LO can earn 100 basis points, with another earning 85. "In sum, creditors don't need to pay all loan originators the same," said one Fed attorney.
The new rule makes it difficult for managers to penalize LOs for mistakes and errors. The Fed has ruled that mortgage companies cannot dock a LO's compensation if they incorrectly calculate closing costs and exceed the tolerances on the good-faith estimate. If RESPA forces you to lower the closing costs to the consumer—that's a pricing concession to the consumer. A loan officer or originator cannot be made to bear that cost.
The American Bankers Association disagrees with that interpretation. The penalty is not based on terms or conditions. It is based on someone violating the regulation. (nmn33011).
MORAL
The Feds have no give.
CALIFORNIA MORTGAGE COMPANY ACCUSED OF VIOLATING THE EQUAL CREDIT OPPORTUNITY ACT AND GETS TO PAY THE FEDERAL TRADE COMMISSION $1.5 MILLION AS A SETTLEMENT
FACTS
The Federal Trade Commission sued Golden Empire Mortgage Inc. and its owner Howard D. Koostra in May 2009 for allegedly violating the Equal Credit Opportunity Act in the pricing of mortgage loans. The lawsuit was filed in the United States District Court in Los Angeles.
The FTC contended the company loan officers and branch managers arbitrarily charged “overages” at their discretion through higher interest rates and higher up front charges. The loan officers were then paid a percentage of the overages as compensation. The FTC argued that the lender failed to monitor whether Hispanic consumers were paying higher overages than other borrowers, and as a result, the Hispanic borrowers were disproportionately charged higher than non-Hispanic white borrowers. The FTC claimed that the lender discriminated against the Hispanic consumers based on their race.
The parties entered into a stipulated agreement in September 2010 whereby Golden Empire will pay $1.5 million to settle the discrimination charges. (Federal Trade Commission v. Golden Empire Mortgage Inc. / 2:09-cv-03227-CAS-SH, ladj-v&s p.4-10-1-10))
MORAL
The FTC had seven lawyers. Golden Empire had six lawyers. This was over a period of 16 months from very prestigious law firms. Can you imagine the legal bill?
CALIFORNIA MAN FOUND GUILTY OF MORTGAGE FRAUD
FACTS
On March 31, a federal court jury found Gabriel Richard Viramontes guilty of six counts of bank fraud and seven counts of mail fraud. After a seven-day trial, it only took the jury only one hour to come in with the guilty verdict.
Viramontes and three co-defendants, who had already pleaded guilty to related charges, engaged in a mortgage fraud scheme that involved at least 19 homes with loans of more than $8 million.
From June through October 2006, the defendants through VFM INVESTMENT GROUP, ESNIAN MORTGAGE REALTY AND FREEDOM CAPITAL MORTGAGE, asked investors to purchase with no money down single-family homes on behalf of others with bad credit who wished to purchase homes. The investors were told they would benefit financially from the transactions.
The defendants then defrauded lenders such as Washington Mutual Bank, Long Beach Mortgage and Fremont Investment and Loan by submitting fraudulent loan applications that inflated the buyers' income, falsely stated that a buyer was employed at a specific job and falsely stated that the properties would be owner-occupied.
Following the verdict, Judge Garcia remanded Viramontes into custody to await sentencing. Viramontes is to be sentenced June 23.
Co-defendant James Roy Martin pleaded guilty in March 2010 to making false statements on a loan application and to money laundering. Mario Fellini also pleaded guilty in March 2010 to making false statements on a loan application. A third co-defendant, Joseph Salvatore Gallo, pleaded guilty in February to concealing knowledge of a felony. All three are from Sacramento and are awaiting sentencing. (sacrob33111)
MORAL
With three co-defendants having previously pled guilty, the odds are they cooperated in the trial against Viramontes. Did you notice it only took the jury one hour to convict?
TWO OF THE MAIN FIGURES IN AN OHIO MORTGAGE FRAUD SCHEME THAT WAS ONE OF THE LARGEST IN THE COUNTRY FOUND GUILTY
FACTS
On April 1, two of the main figures in a mortgage fraud scheme that prosecutors say was one of the largest in the country were found guilty. Uri Gofman, the Beachwood man who federal prosecutors said ran the operation, and Anthony Viola, head of the realty company that handled many of the bogus house sales in the scheme, were also found guilty of wire fraud. The wire fraud charges resulted from out-of-state loan companies being defrauded into wiring money to the conspirators across state lines.
Viola, owner of REALTY CORP. OF AMERICA, was found guilty of 34 of the 35 wire fraud cases against him. Jurors found Gofman guilty of nine counts. Gennadiy Simkhovich, described by his lawyer as the bookkeeper for the operation, was found not guilty of all 36 charges against him.
Federal prosecutors accused the men of participating in a scheme to provide false information on mortgage applications, obtaining loans for bogus sales between them and other participants, and then pocketing the money while allowing most of the homes to fall into foreclosure.
Cuyahoga County prosecutors described the operation in broader terms when they indicted more than 40 people in 2009 for participating in it. They said it involved 453 homes—79% which eventually fell into foreclosure—and $44 million in fraudulent loans. They said the scheme helped drive down property values in neighborhoods where Gofman and his associates bought and sold homes. More than half were in Cleveland, and of those nearly all were on the East Side, which has been hit hard by foreclosure and collapsing home prices. The foreclosures led to $787,000 in delinquent property taxes, county prosecutors said.
GOFMAN AND VIOLA COULD SPEND EIGHT TO NINE YEARS IN JAIL. They are scheduled for sentencing June 17.
The federal indictment described Gofman and Simkhovich as principals in a real estate company called REAL ASSET FUND, which provided down payment money to a conspirator to buy homes. That money was returned to Real Asset from inflated mortgages when the homes were sold, also to a conspirator.
Strongsville resident PAUL LESNIAK was indicted on charges of being a conspirator who bought homes in the scheme, often giving false information in mortgage applications. He pleaded guilty to conspiracy in the case last April. Also pleading guilty to conspiracy before the trial were Noah Bloch, owner of NB Development, who allowed Lesniak to fraudulently list NB Development as his employer as part of the scheme, and DAVE PIRICHY, a loan officer for Central National Mortgage, who was accused of being the mortgage broker who signed the false mortgage applications.
Prosecutors also obtained guilty pleas earlier from three other defendants who cooperated in the case. KATHRYN CLOVER OF NORTH OLMSTED admitted buying properties for the operation, NICHOLAS MYLES OF MAYFIELD admitted helping obtain mortgages, and ANTHONY CAPUOZZO OF CONCORD TOWNSHIP admitted serving as title agent. (Cleveland.com4211)
MORAL
I would say that Gennadiy Simkhovich had one very good, excellent lawyer to get him off on all 36 counts. I would say when in Ohio, and you are in trouble, you might seriously consider him considering this was a federal criminal trial and he did that well.
FORMER PENNSYLVANIA WOMAN NOW LIVING IN TEXAS INDICTED FOR MORTGAGE FRAUD
FACTS
On March 29, JOANNE M. SEELEY, FORMERLY OF EAST BERLIN, Pa. has been charged with defrauding 14 mortgage lenders, 35 homeowners and five individual investors in Cumberland, Dauphin, York, and Adams Counties out of approximately $2,700,000 between 2006 and 2008.
Seeley appeared before U.S. Magistrate Judge J. Andrew Smyser in Harrisburg on a 10-count indictment charging her with five counts of wire fraud and five counts of unlawful monetary transactions. Each count is punishable by a maximum of 20 years' incarceration and a $250,000 fine.
Seeley, who now lives in Texas, was a Pennsylvania licensed real estate agent until Nov. 9, 2006, when she surrendered her license in lieu of disciplinary action. Between 2006 and 2008 Seeley was the primary owner and operator of an East Berlin-based real estate business known as S&D PROPERTY SOLUTIONS.
According to the indictment, Seeley devised and perpetrated a scheme to defraud the victims through the use of false real estate sales contracts, inflated property appraisals, bogus employment verifications, and fictional leases. Seeley would identify a residence scheduled for Sheriff's Sale and advise the homeowner he/she could avoid foreclosure by selling the home to her or one of her buyers, who would then lease the property back to the homeowner after the sale. Seeley assured the homeowner the sale would allow him to pay off his personal debts, rebuild his credit rating, and allow him to qualify for a new mortgage when he bought back the home, usually one or two years later.
Seeley would tell the buyers of the properties they would be reimbursed for all out-of-pocket expenses, including their down payment, plus a "fee" for engaging in the transaction, at the closing. Seeley also promised the buyers they would receive a monthly rent that would cover most, if not all, of their mortgage payments. Some buyers also received an upfront payment designed to make up the difference between their mortgage payment and the rent they received.
Seeley allegedly submitted a plethora of false documents and inflated appraisals to the lenders in order to induce them into making the loans, which eventually caused 14 mortgage lenders to lose approximately $2,500,000. Seeley submitted redacted sales contracts concealing the fact the buyer and seller had entered into buy-back agreements and that the down payment was refunded to the buyer from the loan proceeds. Seeley also submitted false leases to the lenders listing fictitious tenant names and rents.
The Indictment alleges Seeley converted a significant portion of the financing to her own use. When Seeley would purchase the property in her name or the name of a family member, she would charge an inflated commission, with the fee ranging anywhere between 17% and 57%. When Seeley employed a third party to purchase the property, she would simply have the homeowner surrender his sale proceeds check to S&D.
The Indictment also alleges Seeley defrauded five individual investors by selling them real estate “franchises” and promising high rates of return on real estate investments. Instead, Seeley employed a significant portion of the funds to avoid the foreclosure of her personal residence. Together the five investors lost approximately $200,000. Moreover, none of the defrauded homeowners were ever able to buy back their homes.
Judge Smyser released Seeley on supervised release pending trial. (usattymdpa33011)
MORAL
The prosecutors went back five years here and followed her to Texas. With the amount of the loss, I would say she has serious problems. Because if found guilty, I am of the opinion she is facing significant prison time.
FIVE INDICTED IN DALLAS TEXAS FOR $22 MILLION MORTGAGE FRAUD
FACTS
In March 2011 a 29-count indictment, by a federal grand jury in Dallas charges five individuals with various felony offenses related to a mortgage fraud scheme they ran for nearly three years in the Dallas-Fort Worth area. The indictment CHARGES MICHAEL ANTHONY BAKER OF HOUSTON; MONIQUE UNTAE STALLWORTH OF GARLAND; STERLING WESLEY HARRIS OF DALLAS; KOREEM DUJUAN BAKER OF DALLAS; AND FOLAMI DAYO BAKER OF DESOTO each with one count of conspiracy to commit wire fraud. Michael Baker was a Dallas resident at the time of the alleged fraud. Michael and Koreem Bakers are brothers.
Harris appeared the week of March 28, before U.S. Magistrate Judge Irma C. Ramirez for his initial appearance and was released on personal recognizance bond. Michael Baker, Stallworth, and Folami Baker are expected to surrender within a few days. Koreem Baker is currently in state custody and is expected to be transported to court within the next few weeks.
The indictment alleges that the defendants operated a mortgage fraud conspiracy from December 2004 until at least October 2007 to defraud and obtain money from lending institutions by, among other things, using straw buyers to purchase homes by submitting false and fraudulent documents and statements to lenders. In total, the indictment alleges that the defendants obtained nearly $22 million in fraudulently obtained loan proceeds.
All defendants are charged with multiple substantive counts of wire fraud. Michael Baker is charged with one count of money laundering, and Koreem Baker is charged with 16 counts of engaging in a monetary transaction with criminally derived property.
The indictment alleges that the defendants profited from loans to purchase residences in the Dallas area; fraudulently obtained mortgages in others’ names; fraudulently obtained mortgages for more than the sales price; fraudulently found individuals with sufficient credit to qualify for the loans; FRAUDULENTLY MADE EACH BORROWER APPEAR TO BE A QUALIFIED, BONA FIDE PURCHASER WHO INTENDED TO RESIDE IN THE PROPERTY, when the borrower had no intention of doing so; fraudulently created surplus loan proceeds by creating bogus invoices for repairs/upgrades which were never done; fraudulently allowed the residences to go into foreclosure after no, or just a few, payments were made on the loan; and fraudulently shared in the surplus loan proceeds. Discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.
An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. If convicted, however, the conspiracy to commit wire fraud count and each of the substantive wire fraud counts carries a maximum statutory sentence of 20 years in prison and a $250,000 fine. The money laundering count carries a maximum statutory sentence of 20 years in prison and a $500,000 fine, upon conviction. Each of the counts charging engaging in a monetary transaction with criminally derived property carries a maximum statutory sentence of 10 years in prison and a $250,000 fine, upon conviction. The indictment also includes a forfeiture allegation which would require any convicted defendant to forfeit to the U.S. proceeds or property traceable to their offenses. (usattyndtx32911)
MORAL
Chasing loans from seven years ago. Still indicting people on them as late as March 2011. In this attorneys’ opinion the indictments will go on for mortgage fraud for at least two more years. That means they are still investigating, still looking at all loans that are questionable, especially stated income loans.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
