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ARIZONA ENACTS CONSUMER CREDIT FREEZE LAW
FACTS
Effective Aug, 31, 2008 Arizona will allow consumers to "freeze" their credit reports and prevent
consumer reporting agencies from releasing credit information to third parties without the express authorization
of the consumer. Mortgage lenders and brokers are affected and are allowed to treat an application for credit as
incomplete if unable to access a consumer's credit report due to a security freeze. (allregs42108)
MORAL
Tell the consumer if I cannot get to your credit, then neither any lender nor I can get you a loan. Or first
ask the borrower if (s)he has put a credit freeze with any or all of the three bureaus so you are not surprised
later.
CALIFORNIA LEGISLATION PROPOSES A DEED THAT WILL TRANSFER REAL PROPERTY ON DEATH OF THE OWNER
FACTS
AB 250 creates the revocable transfer on death deed, which transfers real property on the death of its owner
without a probate proceeding. The bill requires a person have testamentary capacity to make or revoke the deed
and requires the deed be in a statutory form provided for this purpose. The revocable TOD deed must be signed,
dated, and acknowledged, as specified, and recorded, as specified, to be effective. The deed, during the
owner's life, does not affect his or her ownership rights and, specifically, is part of the owner's estate for
the purpose of Medi-Cal eligibility and reimbursement. The bill voids a revocable TOD deed if, at the time of the
owner's death, the property is titled in joint tenancy or as community property with right of survivorship. The
bill establishes priorities for creditor claims against the owner and the beneficiary of the deed in connection
with the property transferred and limits on the liability of the beneficiary. The bill establishes a process for
contesting the transfer of real property by a revocable TOD deed. (AB 250)
MORAL
The lawyers' right to work act. It provides exceptions for joint tenancy and community property deeds but what
if the title is broken by one party secretly executing a quitclaim deed to convert their joint tenancy share or
community property share to tenancy in common and then do the TOD? Interesting question when you think about it.
CALIFORNIA LEGISLATION PROPOSES TO AMEND COVERED LOAN AND FORECLOSURE LAWS
FACTS
AB 2359 prohibits a broker, trustee, or mortgagee, or his or her agent, beneficiary or assigns from requiring
as a condition of an agreement regarding a high-cost loan, subprime loan, or nontraditional mortgage, as defined,
that a borrower or an applicant for the loan waive any rights, remedies, obligations, or procedures of California
law with respect to a residential mortgage or mortgage foreclosure.
This bill also prohibits a broker, trustee, or mortgagee, or his or her agent, beneficiary, or assigns
from refusing to enter into an agreement with a borrower or an applicant regarding a high-cost loan, subprime loan,
or nontraditional mortgage solely because he or she refuses to waive rights, remedies, obligations, or procedures
provided for in those provisions. The bill would also provide that the exercise by a borrower or applicant of the
right to refuse to waive legal rights, remedies, obligations, or procedures, including a rejection of an agreement
to arbitrate, shall not affect any other term of the agreement. This bill also places on the broker, trustee, or
mortgagee or his or her agent, beneficiary, or assigns, the burden of proving that any waiver of rights, remedies,
obligations, or procedures of California law with respect to these loans, including any agreement to arbitrate
a claim or dispute, was knowingly and voluntarily made by the borrower or applicant and was not a condition of
the agreement. This provision would apply to an agreement to waive any rights, remedies, obligations, and procedures
of California law with respect to those loans, including an agreement to arbitrate that is entered into altered,
modified, renewed, or extended on or after Jan. 1, 2009.
This bill specifies that provisions presuming validity in contracts would not apply to any arbitration agreement
that is involuntary, unconscionable, against public policy, or otherwise unenforceable.
This bill deletes exemptions from liability for an assignee that is a holder in due course and the exemption
for persons chartered by Congress to engage in the secondary mortgage market.
The bill makes any purchaser or assignee of a high-cost loan subject to all affirmative claims and any
defenses with respect to the loan that the consumer could assert against the original creditor or broker
of the loan, except as specified. The bill authorizes a borrower to assert certain claims to reduce
or extinguish the borrower's liability under a high-cost loan within specified timeframes against a creditor, subsequent
holder, or assignee of the loan. (AB2359)
MORAL
If the bill passes, watch out hard money broker/lenders. Where are you going to sell the loans if the buyer
cannot plead as a defense he is a good faith purchaser without notice of what occurred prior to his buying the
loan?
CALIFORNIA LEGISLATION WILL REQUIRE DRE BROKERS, CFL BROKER/LENDERS AND RMLA LENDER/BROKERS
TO SEND SENIOR CONSUMERS TO ADVISORS PRIOR TO APPLICATION BEING ACCEPTED
FACTS
A.B. 2460, Real estate brokers, finance lenders and residential mortgage lenders will be required to
refer a senior consumer to a specified HUD-approved 3rd-party counselor prior to accepting a final consumer loans
application and would make this provision applicable to consumer loans made after a specific date. (ab2460)
MORAL
Don't you just love free enterprise? Just as you think you save someone money the government creates another
counselor for the consumer to pay.
CALIFORNIA LEGISLATION PROPOSES SURETY BONDS FOR MORTGAGE BROKERS
FACTS
AB 2880 requires a real estate broker who makes, arranges, or services loans secured by real property to maintain
a surety bond with the commissioner. Provides that a mortgage broker who provides brokerage services to a borrower
is the fiduciary of the borrower. (ab2880)
MORAL
I trust you all are contributing to your PAC committee. For those of you that do not swim together will surely
drown alone.
CALIFORNIA LEGISLATION PROPOSES NOTICE BY BROKERS IF THEY MAKE, ARRANGE OR SERVICE LOANS
FACTS
SB 1053 requires a real estate broker who makes, arranges, or services loans secured by residential real property
to notify the DRE in writing, as specified, to pay specified penalties for failing to provide that notification,
and to notify the DRE when he or she is no longer subject to this requirement. The bill also require these
brokers to keep documents and records that will enable the commissioner to determine whether specified functions
performed by them comply with the Real Estate Law. The bill authorizes the commissioner to inspect and examine
or audit the business documents and records of a real estate broker or salesperson in this regard at any time without
prior notice. The bill also authorizes the commissioner to require special reports from time to time from these
brokers
The bill further requires a broker who makes, arranges, or services eight or more of these
loans in a calendar year to file various reports including one done by a CPA, with the department commencing
Jan. 1, 2010, and would authorizes the commissioner to cause an examination and report to be made and
to charge the broker for one and one-half times the cost of thereof, if the broker fails to timely file those
reports.
The bill requires the commissioner to examine the affairs of these brokers, and the brokers and salespersons
acting under them, for compliance with the Real Estate Law, as specified, and authorizes the commissioner to impose
penalties against those brokers or salespersons based on the findings of those examinations. (sb1053)
MORAL
Watch out for Jan. 1, 2010. If you arrange the loans you will be required to keep reports that you are not required
to do now when you are just a broker of loans. You will also see your overhead go up as a small business due to
the CPA compliance audit although I do not know how a CPA knows the law of licensing compliance. Additionally,
you will be required to speak under oath and the commissioner can come into your office without notice. Both the
requirement to speak and the lack of notice are new law and you can be disciplined for refusal to speak or allow
entry without notice.
NEW CENTURY LOAN OFFICER SENTENCED FOR MORTGAGE FRAUD KICKBACKS
FACTS
Renato Gonzales Quiazon, a former loan officer at bankrupt subprime mortgage lender New Century Financial
Corp. in Irvine, was sentenced to three years in prison and ordered to pay $769,229 for taking kickbacks
and siphoning cash from borrowers' escrow accounts. He devised a scheme to use a mortgage broker's name on loans
that Quiazon processed, prosecutors said, giving 20% of the commission to the broker and keeping 80% for himself.
The scam lasted from 2000 to 2004. (lat43008)
MORAL
Now that is novel. Take loans generated by the retail section of the lender and bribe a broker to say they are
his, pay him 20% and keep 80%. At least it is new. Criminal but new.
CALIFORNIA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Iftikhar Ahmad of Stockton, Calif., pleaded guilty in Sacramento Federal Court to federal felony charges
connected to a subprime mortgage fraud scheme in San Joaquin County. He is the fourth defendant to admit wrongdoing
in a federal investigation of property transactions between 2003 and 2005.
Ahmad admitted taking part in defrauding Long Beach Mortgage in connection with the sale of 10 residential
properties that his company, I&R Investment Properties, owned in the Stockton area.
He and his company used straw buyers who had no actual connection to the transactions, secretly made down payments
for them, and made false statements on loan documents to finance the purchases at inflated prices and obtain more
than $1.5 million in loan proceeds from Long Beach Mortgage.
Another defendant, Jose Serrano of Stockton, pleaded guilty on April 17, 2008 and admitted that Ahmad
had paid him to recruit straw buyers to let their names be used, and that they arranged to pay some of the buyers
for their participation. A third defendant, Manpreet Singh of Stockton, admitted receiving more than $22,300
from Ahmad to act as a straw purchaser. Ahmad is scheduled to be sentenced July 14, 2008. (sfchron42908)
MORAL
Are you keeping track? The fraud occurs about two-to-three years before the indictment. So those that committed
fraud between 2006 and now are being indicted now and will go on to be indicted until 2020 if they are currently
under investigation. See your lawyer now before you see the indictment later if you are one of the above.
CALIFORNIA MAN ARRESTED IN FORECLOSURE BAILOUT SCAM
FACTS
Michael D. Henschel of Van Nuys was arrested by Los Angeles County authorities, who accused him of
operating foreclosure scams that took in hundreds of homeowners, costing some their houses.
Henschel faces 71 state charges, including forgery and conspiracy counts, in an alleged scheme to defraud
homeowners from 2000 to 2004. Canoga Park resident Alan Mitchell also was arrested and faces 32 charges.
Henschel and Mitchell are accused of offering to save homeowners from foreclosure if they paid a monthly consulting
fee and transferred part-ownership of the properties, often to a fictitious entity. While pretending to renegotiate
loans, the pair charged rent to homeowners, Christopher said. The two men would file for bankruptcy protection
using phony debt and made-up names to hold off the banks and extend the "rental" period for several months
it is alleged.
Deputy Dist. Atty. David L. Fleck is listed as a prosecutor in the complaint. Bail was set at $800,000 for Henschel
and $400,000 for Mitchell. In the past, Henschel has allegedly faced a slew of misdemeanor and felony charges and
has been convicted at least five times, but he has always managed to dodge prison time.
In an Arizona case that mirrors the current one, Henschel pleaded guilty in federal court in 2004 to filing
more than 200 fraudulent bankruptcies and pocketing more than $50,000 in rental income and fees from homeowners
with shaky mortgages. He was sentenced to probation, community service and restitution.
According to the latest complaint, Henschel knocked at the door of one man's North Hollywood home in 2001 and
offered to purchase it, starting with a $1,500 payment and an additional $3,500 after escrow closed. The complaint
said Henschel then transferred title to the man's residence to a cover trust and signed the man's name without
his knowledge over the next two years to eight deeds that transferred partial interests in the property.
In 2002, according to the complaint, Mitchell sent fliers to a Rolling Hills woman advertising "foreclosure
relief services" for $500 a month. Mitchell and Henschel transferred partial interests in her home to fictitious
names until the woman's home was foreclosed on, the complaint says.
In yet another case, the complaint accuses Mitchell of falsely representing himself as an attorney to a couple
while Henschel promised to land them a new loan. The men collected $2,500 while the homeowners lost their property.
(lat41808)
MORAL
It is said Henschel served no prison time for the prior offenses. It will be interesting to see if his luck
still holds.
FLORIDA MULTI-MILLION DOLLAR MORTGAGE FRAUD MASTERMINDS SENTENCED TO FEDERAL PRISON
FACTS
Richard Weldon Crowder II, and Gary Mark Mills were sentenced April 24,
2008 to 108 months and 46 months imprisonment, respectively. Co-defendant Karen Lynn Sullivan
was sentenced April 23, 2008 to 50 months imprisonment. The defendants were sentenced for their roles in
a multi-million dollar mortgage fraud conspiracy.
Crowder is a former licensed mortgage broker and the former owner of America's Best Mortgage Services Inc.,
located in Coconut Creek, Fla. Mills is a former title attorney and the owner of Four Star Title Inc., located
in Deerfield Beach, Fla. Sullivan is a former loan officer for Wachovia Bank.
The defendants are scheduled to appear again in court on May 29, 2008, at 10:00 a.m. for a hearing to determine
the amount of restitution they must pay to the victims in this case.
Crowder identified residential properties, including luxury condominiums on South Beach that were available
for purchase. He then recruited buyers for the properties, representing that he could obtain 100% financing for
their purchase. After finding a purchaser, Crowder would apply for equity lines of credit on their behalf with
Wachovia. To induce Wachovia to issue the equity lines of credit, Crowder and Mills prepared fraudulent HUD-1 settlement
forms. The forms falsely stated the buyers already owned the properties and also significantly understated the
amount of the first mortgages on the properties. The fraudulent HUD-1 settlement forms were then given to Sullivan,
who used the forms to facilitate the issuance of equity lines of credit from Wachovia.
Simultaneously, or shortly after obtaining the equity lines of credit from Wachovia, Crowder applied for the
first mortgages on the properties. These applications overstated the buyers' assets and income, and also included
false verification of deposit forms prepared by Sullivan. To further induce the lenders to issue the loans, Mills
prepared documents falsely representing that the buyers were using their own money for the down payments and closing
costs. In fact, the buyers were using funds from the fraudulently obtained Wachovia equity lines credit or funds
provided by Crowder. In total, the defendants caused the fraudulent purchase of 17 different luxury condominiums
at The Continuum on South Beach and at The Point in Adventura using more than $37,000,000 in fraudulently obtained
mortgage loans. (usattysodistfl42408)
MORAL
You have to give them credit. They chased $37 million. But they got caught. Now they face four to nine years
in a federal hotel. The stupid thing is they did it to a federally insured bank giving the federal people 10 years
to file an indictment and people always get caught because it is a paper trail and it just following the money.
I still do not understand why considering the shame they bring on their respective families.
FLORIDA SOUTHERN DISTRICT INDICTS THREE FOR MORTGAGE FRAUD
FACTS
A federal complaint in the Southern District of Florida by the U. S. Attorneys' Office indicted Barry Louidort,
Ralph Michel and Lauren Jasky as allegedly getting involved in a sophisticated subprime mortgage fraud scheme
in South Florida through which they submitted false qualifying information regarding potential borrowers to
mortgage lenders. Among the false information the defendants submitted were false verification of earnings and
false verification of deposits. As a result of these false submissions, defendants Louidort and Michel received
approximately $6 million in loan proceeds.
This investigation began with an audit conducted by the Florida Office of Financial Regulation into 24 subprime
mortgage loans in the period November 2006 to June 2007. The initial audit showed that the loans included
what appeared to be excessively large fees paid to defendants Berry Louidort and Ralph Michel. The fees, ranging
from $29,000 to $650,000, were described as marketing and/or assignment fees. In reality, the fees were kickbacks
to defendants Louidort and Michel based on inflated sales prices. The audit also revealed that the majority
of the suspect loans were originated by defendant Lauren Jasky senior vice president of Compass Mortgage Services,
located in Boca Raton, Fla.
If convicted, the defendants face a maximum term of incarceration of up to 30 years and a fine of up to $1,000,000.
This prosecution is the result of the efforts of the Palm Beach County Mortgage Fraud Task Force. This Task
Force is composed of federal and state law enforcement agencies, including the U.S. Attorney's Office for the Southern
District of Florida, the Internal Revenue Service, the Federal Bureau of Investigation, the U.S. Department of
Housing and Urban Development - Office of Inspector General, the U.S. Department of Veteran Affairs - Office of
Inspector General, the United States Probation Office, the Office of Financial Regulation, the Department of Financial
Services, and the Palm Beach County Sheriff's Office. (usttysodistFL42308)
MORAL
Note two things. 1-Investigation showed excessive broker fees. 2-Eleven different government agencies are involved
in the investigation. Any bets the IRS is chasing undeclared income in the tax returns?
MARYLAND RESTRICTS PREPAYMENT PENALTIES AND AMENDS LENDER, BROKER AND ORIGINATOR LICENSING
LAWS
FACTS
Effective June 1, 2008, Maryland prohibits prepayment penalties, revises borrower repayment ability restrictions,
and it is amending licensing requirements for mortgage lenders, brokers and originators. Under the new law, prepayment
penalties are prohibited in all mortgage loans for personal, household, or family purposes that are secured by
residential real property. Mortgage lenders must analyze the borrower's ability to repay any mortgage loan.
A borrower's repayment ability must include consideration of a borrower's debt-to-income ratio and verification
of the borrower's income and assets by review of third-party written documentation. There are several amendments
to licensing requirements for mortgage lenders, brokers and originators, including: the establishment of
a net worth requirement; an increase in required surety bond amounts; and amendments to licensing
fees and renewal dates. In addition, the law allows the Commissioner of Financial Regulation to participate in
the multistate automated licensing system.
MORAL
Hard money lenders beware! No prepayment penalties. Licensees beware! You need net worth and your surety bond
increases meaning the cost of the bond increases as well.
MONTGOMERY MORTGAGE CAPITAL OF NEW JERSEY IS NOW GONE
Montgomery Mortgage Capital Co. of New Jersey closed wholesale operation in 2007. The retail operation also
closed recently. The company had 13 offices in NJ and NY, was licensed in 21 states, and also operated under the
fictitious business names of Montgomery Funding and Montgomery Residential Mortgage.(42408mi-implode)
MORAL
One less lender available to accept brokered mortgage loans. One less competitor for remaining wholesale lenders.
Remember the old adage. The bottle is half full or half empty. It depends on your point of view!
NEW YORK BARS FORECLOSURE BY BANK BECAUSE OF PREDATORY LENDING PRACTICES
FACTS
In a sweeping decision, a motion for foreclosure in LaSalle Bank, N.A. v. Shearon was denied by the state
of New York, as a result of numerous violations of New York's predatory lending laws said David Souders, an attorney
for Weiner Brodsky Sidman Kider P.C.. (md32608)
MORAL
First: In October and November 2007, three federal judges in Cleveland and Dayton refuse to allow 85 foreclosures
to proceed because the lenders (MBS and banks) cannot prove ownership of the mortgages and promissory notes secured
by the mortgages.
Second: Massachusetts in March 2008 bars Fremont Savings & Loan from foreclosing because the mortgage loan
was predatory (on3608).
Now New York bars foreclosure because the loan is predatory. The lenders not only lose by the decrease in value
of the property but more and more judges are refusing to allow foreclosures when laws appear to be predatory.
OHIO PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Donald F. Green of Columbus, pleaded guilty in United States District Court to one count of income tax evasion,
one count of conspiracy to commit bank fraud and wire fraud, and one count of bank fraud in connection with his
role in a mortgage fraud scheme that fraudulently secured more than $2.6 million in mortgage loans in 2003 and
2004.
Green bought houses usually in need of substantial repairs in distressed neighborhoods in Columbus in
2003 and 2004 at or near their true-market value. In 2003, Green developed a working relationship with Jonathan
L. Boyd, a loan officer at Summer Tyme Mortgage. Boyd would recruit straw buyers to purchase Green's properties,
using fictitious income numbers in order to increase their apparent credit worthiness. Boyd arranged for inflated
appraisals of many of those properties by Darneil Gaither. The conspirators used false information to fraudulently
obtain approximately $2,651,200 in mortgage loans.
In 2004, Green sold similar houses to other straw buyers through a scheme set up by codefendants Aryeh Schottenstein,
Jeffrey Lieberman and Shawn Griffin in an investment program with Stillwater Capital Partners. Stillwater paid
Griffin substantial amounts of money to renovate these properties provided by Green, but Griffin failed to follow
through on any renovations. Green received so-called "consulting fees" on several of these deals yet
failed to report this income on his tax returns.
Green also gave his tax preparer schedules of fictitious improvements made on many of the properties in order
to reduce his capital gains profits and therefore his taxes on the sale of the properties. By not reporting all
of his income, Green fraudulently avoided an additional tax due and owing of $100,332.97 for 2003, and $130,043.19
for 2004.
Green and the others were indicted in August 2007. Charges are still pending against Boyd and Gaither. Schottenstein,
Lieberman and Griffin have plea agreements pending.
Income tax evasion and conspiracy are each punishable by up to five years imprisonment, complete restitution
to the IRS and the victims, and the costs of prosecution. Bank fraud is punishable by up to 30 years imprisonment
and a fine of up to $1 million plus restitution. (usattyso.dist.ohio41108)
MORAL
You have to admit. There was organization in the operation. Too bad it was not used for honest purposes.
THE INFORMATION HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
