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January 29, 2009

Ginnie Mae Working to Address Mortgage Fraud

Ginne Mae logo from the Ginna Mae website. Thi...Image via Wikipedia

The Government National Mortgage Association (GNMA, also known as Ginnie Mae), is seeking to help the federal insurance programs that feed its business catch fraud and other sources of potential losses, GNMA President Joseph Murin said, according to Bloomberg.

Ginnie Mae provides guarantees on mortgage-backed securities (MBS) backed by federally insured or guaranteed loans, mainly loans issued by the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service, and Office of Public and Indian Housing. Ginnie Mae securities are the only MBS that are guaranteed by the United States government.

From Bloomberg:

Ginnie Mae is stepping up evaluations of data on Federal Housing Administration and Department of Veterans Affairs loans being packaged into its securities and is considering ways to expand the use of automated tools to complete the task, Murin said in a telephone interview last week.

“If it slips through the cracks on the way over here, we want to be the last line of defense,” he said.

The FHA, the main source of Ginnie Mae collateral, “has capacity issues that require immediate attention,” after its share of new loans soared as private sources of mortgage financing retreated amid the U.S. housing slump, Shaun Donovan, President Barack Obama’s pick as secretary of Housing and Urban Development, said in a Jan. 13 congressional hearing. Issuance of Ginnie Mae-backed home-loan bonds almost tripled last year to a record $269 billion, according to newsletter Inside MBS & ABS.

Murin, 59, said his Washington-based agency, formally called the Government National Mortgage Association, is also ramping up disclosures and changing other rules to improve demand for its securities. One step it’s seeking to accomplish next quarter is the release of data on the amount of delinquencies and defaults on the loans underlying its bonds, Murin said.

Senator Richard Shelby, an Alabama Republican, said last week that the FHA “poses a significant risk to taxpayers,” who already have agreed to pump as much as $200 billion into Fannie Mae and Freddie Mac, the government-chartered mortgage-finance companies taken over by regulators in September.

‘Full Faith and Credit’

The FHA, a HUD department that backs loans with down payments as low as 3.5 percent, has expanded to insure 21 percent of new single-family loans from 4 percent in 2005, Donovan said. The FHA insurance fund’s reserves have fallen to 3 percent from 6.5 percent a year ago, he said.

Ginnie’s focus is typically on the health and practices of the issuers of its securities, not the actual loans, a type of oversight it’s also increased, Murin said. The independent agency, funded by its guarantee fees, relies more on outside vendors including Deloitte & Touche LLP and Lockheed Martin Corp. than the FHA for help in risk management, he added.

The agency doesn’t now offer data on the performance of mortgages backing its main types of bonds. The securities are backed by the “full faith and credit” of the U.S. government. Delinquency and foreclosure information may help investors better understand how quickly their securities are going to be repaid.

“We think we can get better pricing if we provide the information,” Murin said.

Delinquency Buyouts

Ginnie Mae also has revised rules involving buyouts of delinquent loans to improve demand, he said. Servicers can profit by purchasing FHA or Veterans Affairs loans at least 90 days late and with higher-than-market rates from Ginnie Mae securities for face value, and then reselling them within new bonds.

Ginnie Mae no longer allows the repooling of loans unless the borrowers are current, rather than just 60 days or less late, Murin said. Allowing some buyouts is necessary to offer flexibility to servicers to rework mortgages for troubled homeowners, he said.

This month, the agency also plans to begin offering data on the characteristics of loans underlying its securities at the time they are pooled and put into bonds, rather than “after the fact” when they have begun trading, Murin said.

Before becoming Ginnie Mae’s president last year, Murin was president of Mortgage Settlement Network, LLC, a Pittsburgh-based provider of loan settlement services and appraisals.

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Posted By: Ralph Roberts @ 11:08 pm | | Comments (1) | Trackback |
Filed under: Ginnie Mae

January 26, 2009

Bayview Financial’s Steven Gordon Pleads Guilty to Mortgage Fraud in Florida

Image by Getty Images via DaylifeThe U.S. Attorney for the Southern District of Florida (R. Alexander Acosta), and the FBI announced late last week that Steven Gordon, 49, of Miami, Florida, pled guilty to wire fraud charges related to a five-year scheme to inflate the value of mortgage loans to increase his commission compensation. Steven Gordon’s sentencing has been scheduled for April 23, 2009.

Prior to his dismissal in 2006, Gordon was a principal at Bayview Financial, LP, a Coral Gables, Florida-based finance company that buys portfolios of loans from lending institutions. Bayview Financial pooled these loans into newly formed business entities, called “special purpose entities,” and then issued securities backed by those loans to the investing public. During 2006, 2005 and 2004, respectively, Bayview Financial and its affiliates securitized approximately $2.056 billion, $0.954 billion and $1.428 billion, in offerings of residential and commercial mortgage loans, including $1.989 billion, $0.884 billion and $1.243 billion of residential mortgage loans.

While employed at Bayview Financial, Gordon held the title of Director of Residential Acquisitions. One of Steven Gordon’s primary duties was to negotiate the purchase of thousands of loans for Bayview Financial’s residential mortgage securitization program. Gordon’s incentive compensation was based, in part, on his ability to buy those loans at a low cost.

Late last week, Gordon admitted that between 2001 and 2006, he engaged in a scheme to defraud Bayview Financial, in which he regularly altered credit information affecting the value of more than 2,800 loans acquired for Bayview Financial’s residential mortgage securitization program. Gordon’s fraudulent scheme caused Bayview Financial to pay him more than $2.8 million in excessive and undeserved bonuses.

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Posted By: Ralph Roberts @ 11:21 pm | | Comments (16) | Trackback |
Filed under: Arrest,Florida,Mortgage Fraud

January 22, 2009

Jeanetta Standefor Sentenced to 12 Years in Federal Prison for Real Estate Fraud

The promoter of an $18 million real estate investment scheme that targeted African-American individuals in Southern California and other states was sentenced today to 151 months in federal prison. Jeanetta M. Standefor, a 40-year-old resident of Altadena, California, was sentenced in Los Angeles federal court by United States District Judge Percy Anderson. In addition to the prison term, Judge Anderson ordered Standefor to pay $8,688,924.

Through her Pasadena-based company, Accelerated Funding Group (AFG), Standefor operated a bogus “foreclosure reinstatement” program that attracted more than 600 investors between 2005 and 2007. The scheme purported to use investors’ funds to cure defaults on distressed properties about to be put into foreclosure. While soliciting investor money and promising returns of up to 50 percent in time periods as short as one month, Standefor and AFG were instead operating a Ponzi scheme that used money from new investors to pay previous investors.

Jeanetta Standefor pleaded guilty in September 2008 to two counts of mail fraud.

Standefor’s case involved what is commonly called “affinity fraud,” that is, a fraud directed at a particular community. Jeanetta Standefor and AFG targeted investors in the African-American community through a now-defunct Web site, word of mouth, real estate seminars and testimonials by other seemingly successful African-American investors.

Standefor claimed investor funds would be used to assist owners of distressed properties. Written materials put out by AFG touted its foreclosure reinstatement program as “virtually risk-free” and promised investors that their principal would be safely returned within 72 hours at their request. However, Standefor and AFG did not use investor funds to cure defaults on any residential properties, and investors’ requests for return of their investments were ignored.

Jeanetta Standefor used more than $1.9 million of investor funds for personal expenses, such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment events and home renovations.

Posted By: Ralph Roberts @ 11:08 pm | | Comments (11) | Trackback |
Filed under: Affinity Fraud,California

January 21, 2009

Dequincy Hyatt Indicted for Mortgage Fraud in Michigan

As a result of a tip his office received from FlippingFrenzy.com founder Ralph R. Roberts, Michigan’s Attorney General today filed charges against four people for conducting what the AG’s office is calling a “million-dollar mortgage fraud scheme”. According to Michigan Attorney General Mike Cox, the following people are charged with racketeering:

  • Dequincy Hyatt, of Detroit
  • Seaesther Thompson-Hayes, of Flat Rock
  • Aaron Brooks, Jr., of Southgate

The fourth person, Pietro Biundo, of Washington, Michigan, is charged with filing false documents when selling a home in one of the mortgage fraud transactions.

Today’s actions were a direct result of information Ralph R. Roberts, founder of FlippingFrenzy.com and a real estate-focused consumer advocate, provided to the Michigan State Police and Attorney General Cox’s office!

An investigation by the State Police and the AG’s office revealed that in 2006 Dequincy Hyatt, managing partner of J.B. Homes/Construction, LLC., Seaesther Hayes, a mortgage broker, and Aaron H. Brooks, Jr., a former service representative for the People’s Trust Credit Union (PTCU), partnered together to perpetrate a large scale mortgage fraud.

In short, two properties were involved in this case. In the first case, it is alleged that Dequincy Hyatt, Seaesther Hayes, and Aaron Brooks secured a $710,000 mortgage for a $510,000 home in Shelby Township, MI. After paying fees, the three scammers were able to skim more than $163,000 off the transaction.

In the second case, it is alleged the defendants secured a $785,000 mortgage though the straw buyer for a $515,000 Clinton Township, MI, home. The seller of the home in this case, Pietro Biundo, is charged with filing false documents related to the transaction.

Attorney General Mike Cox alleges that the defendants sought and obtained a straw buyer for the two targeted luxury properties. The straw buyer was told that her name and credit, which was boosted by grossly inflated income and asset data, would be used to purchase the properties. The mortgage payments would be made for her by the defendants and her name would later be removed from the mortgages. In return, the straw buyer was promised compensation.

About a year after the transactions, however, Dequincy Hyatt, Seaesther Hayes, and Aaron Brooks stopped making the mortgage payments. The straw buyer was left with two mortgages in her name, and was not able to make payments. Not surprising, both houses went into foreclosure.

Hyatt, Hayes, and Brooks are charged with one count of continuing criminal enterprise (racketeering), a 20-year felony, and two counts of false pretenses, each a 10-year felony. Biundo is charged with one count of false pretenses based on the filing of a falsified deed in the sale of his home, a 5-year felony. Hyatt, Hayes, and Brooks have been arrested and arraigned. Biundo is expected to turn himself in to police shortly.

In 2008, Michigan Attorney General Mike Cox created a mortgage fraud unit and teamed up with the Michigan State Police and other law enforcement agencies to tackle the problem. Cox’s office has also held four mortgage foreclosure forums to help families stay in their homes during these difficult times.

Posted By: 4wordsystems @ 11:12 pm | | Comments (7) | Trackback |
Filed under: Arrest,Michigan,Mortgage Fraud

January 20, 2009

President Barack Obama Addresses Housing Crisis in Inaugural Address

Regardless of your politics or what you think about the 44th President of the United States, you have to admire President Barack Obama for addressing our national addiction to greed and excess within the first 175 words of his inaugural address:

My fellow citizens:

I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors. I thank President Bush for his service to our nation, as well as the generosity and cooperation he has shown throughout this transition.

Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have remained faithful to the ideals of our forbearers, and true to our founding documents.

So it has been. So it must be with this generation of Americans.

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land – a nagging fear that America’s decline is inevitable, and that the next generation must lower its sights.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America – they will be met.

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.

On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics.

I for one am glad we have have a Commander-in-chief who is willing to talk about these issues so openly, just like we do here on FlippingFrenzy.com.

Posted By: Ralph Roberts @ 12:37 pm | | Comments (4) | Trackback |
Filed under: Barack Obama

January 16, 2009

Countrywide and the Ultimate Loan Modification Myth

Photo of Bank of America ATM Machine by Brian ...Image via WikipediaTalk about your loan modification myths… check out this commentary from TheStreet.com’s Glenn Hall:

The story went almost unnoticed and is already lost in the flurry of headlines about Bank of America’s extra $20 billion in bailout bucks and its quarterly loss.

In many ways, the unsung story I’m talking about is more outrageous than giving BofA $45 billion in taxpayer dollars even though it remains profitable (the company said it earned $4 billion in 2008 despite the fourth-quarter loss).

This truly outrageous story is that BofA’s Countrywide division acknowledged in legal documents that it’s only been giving lip service to lawmakers about helping struggling homeowners modify their mortgages, according to MSNBC. The report says that Countrywide’s lawyers describe the mortgage modification talk as “mere commercial puffery.”

It seems Countrywide is defending itself against a lawsuit in New Hampshire brought by a family that claims it was refused a loan modification.

And the banks wonder why Congress feels the need to legislate a solution to the mortgage crisis.

Taxpayers deserve more after being forced to bankroll the likes of Citigroup, JPMorgan Chase, KeyCorp, and BB&T — even General Motors’ financing arm GMAC is getting bailed out (yes, GMAC got caught up in the mortgage mess, too).

Or maybe Bank of America would prefer to discuss “commercial puffery” in bankruptcy court?

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Posted By: 4wordsystems @ 11:25 pm | | Comments (19) | Trackback |
Filed under: Countrywide,Loan Modification Myths

January 15, 2009

Foreclosure Filings Up 81 Percent in 2008

Foreclosure filings were reported on 2.3 million U.S. properties in 2008, an increase of 81% from 2007 and up 225% from 2006, according to the RealtyTrac U.S. Foreclosure Market Report released today.

The steep annual increase came despite a quarterly decrease in the fourth quarter after nine consecutive quarterly increases. And the fourth quarter decrease came despite a surge in foreclosure activity in December. The conflicting trends come largely as a result of artificial pressures on the foreclosure market.

Foreclosure prevention programs implemented to-date have not had any real success in slowing down the foreclosure tsunami. And the recent California law (SB 1137, which went into effect Sept. 15, 2008, and required lenders to contact distressed homeowners about their intent to foreclosure 30 days before filing a Notice of Default), much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners.

That law had a noticeable impact on Notice of Default(NOD) filings in California, with those filings decreasing from around 44,000 in August to around the 20,000 level in September, October and November. But then NOD filings spiked back up to more than 40,000 in December. A similar trend occurred in Massachusetts over the past few months, after foreclosure-extending legislation was enacted there in May of 2008.

Nevada, Florida, Arizona post top state foreclosure rates in 2008

More than 7 percent of Nevada housing units (one in 14) received at least one foreclosure notice in 2008, giving it the nation’s highest state foreclosure rate for the year. A total of 77,693 Nevada properties received a foreclosure filing during the year, an increase of nearly 126 percent from 2007 and an increase of nearly 530 percent from 2006.

Florida registered the nation’s second highest state foreclosure rate in 2008, with 4.52 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year, and Arizona registered the nation’s third highest state foreclosure rate, with 4.49 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year.

Other states with Top 10 foreclosure rates for 2008 were California, Colorado, Michigan, Ohio, Georgia, Illinois and New Jersey.

A total of 523,624 California properties received a foreclosure filing in 2008, the nation’s highest state total. Foreclosure activity in the state increased nearly 110 percent from 2007 and nearly 498 percent from 2006.

With 385,309 properties receiving a foreclosure filing in 2008, Florida documented the second highest state total. Florida foreclosure activity increased 133 percent from 2007 and nearly 412 percent from 2006.

Arizona’s 2008 total of 116,911 properties receiving a foreclosure filing was third highest among the states. Foreclosure activity in Arizona increased 203 percent from 2007 and 655 percent from 2006.

Other states with Top 10 totals for 2008 were Ohio, Michigan, Illinois, Texas, Georgia, Nevada and New Jersey.

Sunbelt cities plus Detroit land on top 10 metro foreclosure rates list

With 9.46 percent of its housing units (one in 11) receiving a foreclosure filing during the year, Stockton, Calif., registered the highest foreclosure rate among the nation’s 100 largest metropolitan areas in 2008. Other California cities in the top 10 were Riverside-San Bernardino at No. 3 (8.02 percent, or one in 12 housing units); Bakersfield and No. 4 (6.17 percent, or one in 16 housing units); and Sacramento at No. 9 (5.20 percent, or one in 19 housing units).

Las Vegas documented the second highest metro foreclosure rate in 2008, with 8.89 percent of its housing units (one in 11) receiving a foreclosure filing during the year.

More than 6 percent of Phoenix housing units (one in 17) received a foreclosure filing during the year, giving the city the fifth highest metro foreclosure rate in 2008.

The foreclosure rate in Fort Lauderdale, Fla., ranked No. 6, with 5.95 percent of the metro area’s housing units (one in 17) receiving a foreclosure filing in 2008. Other Florida cities in the top 10 were Orlando at No. 7 (5.48 percent, or one in 18 housing units) and Miami at No. 8 (5.21 percent, or one in 19 housing units).

With 4.52 percent of its housing units (one in 22) receiving a foreclosure filing during the year, Detroit registered the tenth highest metro foreclosure rate in 2008.

Posted By: Ralph Roberts @ 3:20 am | | Comments (2) | Trackback |
Filed under: Foreclosure,Research,Trends

January 13, 2009

Corporate Fraud Task Force to Take on Mortgage Fraud

A federal task force created in 2002 by President George W. Bush to restore public and investor confidence in corporate America following a wave of major corporate scandals, has finally decided its time add real estate and mortgage fraud to its watch list.

The President’s Corporate Fraud Task Force has been expanded to include six new agencies to help in the focus on mortgage and securitization fraud cases, Deputy U.S. Attorney General Mark Filip, the Task Force Chairman, announced last Friday. The Task Force’s expanded roster includes the:

  • Federal Housing Finance Agency
  • Office of the Comptroller of the Currency
  • Office of Thrift Supervision
  • Federal Reserve
  • Department of Housing and Urban Development
  • Special Inspector General for the Troubled Asset Relief Program

According to the U.S. Department of Justice, since July 2002, the task force has yielded “remarkable results” with nearly 1,300 corporate fraud convictions to date, including more than 200 chief executive officers and presidents, more than 120 corporate vice presidents, and more than 50 chief financial officers. Yet during that same time period, real estate and mortgage fraud became the fastest-growing white collar crime in America.

We’re being told that the new member agencies represent a “continuing focus by the Task Force to crack down on mortgage fraud, particularly with regard to ongoing investigations into securitization fraud.” The additions mark the largest expansion of the Corporate Task Force since it was formed in July 2002.

The Task Force’s current members include the Assistant Attorneys General for the Justice Department’s Civil and Tax Divisions, the Director of the FBI, seven U.S. Attorneys Offices, the Secretaries of the Departments of Treasury and Labor, and the heads of the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Energy Regulatory Commission, Federal Communications Commission, United States Postal Inspection Service, and the Department of Housing and Urban Development’s Office of Federal Housing Enterprise Oversight.

Posted By: Ralph Roberts @ 11:37 pm | | Comments (4) | Trackback |
Filed under: Mortgage Fraud

January 8, 2009

Lara Coleman Pleads Guilty in $132 Million Real Estate Fraud Scheme

Lara Coleman, the former chief operating officer of Investment Properties of America pleaded guilty this week to conspiring to commit mail and wire fraud and to making a material false statement to federal investigators. On July 10, 2008, a federal grand jury returned a superseding indictment against the 40-year-old Coleman for her role in a scheme to defraud and obtain millions of dollars in client funds held by the 1031 Tax Group (1031TG), a qualified intermediary company owned by the same person who owned Investment Properties of America.

Lara Coleman, a resident of Houston, Texas, entered the guilty plea in U.S. District Court in Richmond, VA, before U.S. District Judge Robert Payne. Coleman pleaded guilty to one count of the superseding indictment that charged her with conspiracy to commit mail and wire fraud and to a one-count information charging her with making a material false statement to federal investigators.

According to the plea agreement and statement of facts, Lara Coleman and others used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include promises by the intermediaries to clients regarding the safekeeping of exchange funds in trust.

In the plea agreement, Lara Coleman admitted that 1031TG falsely represented that it would hold client funds solely to complete the clients’ 1031 exchanges. Coleman admitted that after obtaining clients’ exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds to support the lavish lifestyle of the owner of 1031TG, pay operating expenses for the owner’s various companies, invest in commercial real estate and purchase additional intermediary companies to obtain access to additional client funds. In addition, Coleman admitted that she lied to federal investigators about statements that she had made in 2006 to internal attorneys for Investment Properties of America about the amount of money that she and others had misappropriated.

Lara Coleman has agreed, under the terms of her plea, to a sentence of 10 years in prison. At sentencing, scheduled for May 1, 2009, she also faces a $500,000 fine. In addition, the indictment seeks forfeiture of all funds and assets owned by Coleman that were derived from or connected to the misappropriation of the approximately $132 million in 1031TG funds.

In related cases, Robert Field, II and Richard Simring have already pleaded guilty to participating in the conspiracy to defraud 1031TG customers. Robert Field was the chief financial officer and Richard Simring was the chief legal officer of a holding company that was set up, in part, to oversee both Investment Properties of America and 1031TG, however neither company was ever officially made a subsidiary of the holding company. Both men are also scheduled to be sentenced on May 1, 2009.

Posted By: Ralph Roberts @ 10:49 pm | | Comments Off | Trackback |
Filed under: Real Estate Fraud

January 6, 2009

Attorney Michael Rumore Pleads Guilty to Stealing $4M From Real Estate Closings

Image via WikipediaA New Jersey attorney who ran his law practice from the basement of his home, has pleaded guilty to stealing approximately $4,000,000.00 entrusted to him for 20 different real estate closings. Michael Rumore, 50, of Lyndhurst, NJ, gambled away the stolen funds at a variety of Atlantic City, NJ, casinos, including the Trump Taj Mahal Casino Resort.

According to Deborah Gramiccioni, director of the State of New Jersey’s Division of Criminal Justice, Rumore pleaded guilty to first-degree money laundering and second-degree theft by failure to make required disposition of property received. Under the terms of his plea agreement, the State of New Jersey will recommend Michael “Mike” Rumore be sentenced to 15 years in state prison. In addition, he must sign a consent judgment to pay full restitution to the victims ($6,200,00.00), which are five title insurance companies (First American Title Insurance Co., New Jersey Title Insurance Co., Fidelity National Title Insurance Co., Stewart Title Insurance Co., and Lawyers Title Insurance Co.).

Michael Rumore’s sentencing hearing is schedule for April 17, 2009. He is currently free on $100,000 bail.

According to the plea agreement, Michael Rumore was hired as an attorney and settlement agent for numerous real estate purchasers. Between April 2007 and August 2008, he received approximately $4 million into his attorney trust account from various mortgage companies. He had a duty to disburse the funds for closings and use them to pay balances on existing mortgages and other associated costs and fees. In pleading guilty, Rumore admitted that he instead transferred the funds into his personal and business accounts and used them to gamble at casinos in Atlantic City, primarily on slot machines.

A licensed attorney since 1984, Michael Rumore was disbarred in mid-September of last year.

Posted By: Ralph Roberts @ 10:37 pm | | Comments (6) | Trackback |
Filed under: Attorneys,Guilty Plea,Mortgage Fraud,New Jersey

January 5, 2009

Update: Derek Davis (aka Terry McCullough) Pleads Guilty in Cash Back at Closing Scheme

To update a story we first told you about on October 13, 2008, Derek Davis — aka Terry McCullough, 62, of Sacramento, California — pled guilty last week to mail fraud and structuring currency transactions with a financial institution to evade Currency Transaction Reports (CTR) in connection with his role in a widespread mortgage fraud scheme involving cash-back-at-closing. Davis’ misdeeds cost lenders more than $2,500,000.

According to Assistant United States Attorneys Courtney Linn and Phil Ferrari, Derek Davis admitted that between March 2005 and December 2006, he participated in a mortgage fraud scheme in which several individuals purchased approximately 20 residential real properties using a form of 100 percent financing called “80/20.”

In the transactions, Derek Davis caused material misstatements to be made about the purchasers’ monthly income and intent to occupy the property. He further admitted that in the transactions an amount approximately equal to the difference between the purchase price and the true market price of the properties was credited as cash-back-at-closing of each escrow to the bank account of a Nevada Corporation he controlled called Calorneva Land Company.

Not surprising, Davis concealed the cash-back-at-closing credits from lenders. Some of the proceeds from the cash back facet were diverted to accounts held in the name of third parties, but in fact controlled by Derek Davis, and used for a variety of purposes, including making mortgage payments on several of the properties. In total, approximately $1,400,000 was transferred to Calorneva Land Company from escrow companies in connection with the approximately 20 real property transactions.

Cash-back-at-closing schemes prey upon lenders willing to finance as much as 100 percent of the purchase price of real property.

Derek Davis is scheduled to be sentenced on February 27, 2009. Charges remain pending against a second defendant in this case, Dino Rosetti, who is next scheduled to appear in court this Friday, January 9, 2009.

Posted By: Ralph Roberts @ 11:39 pm | | Comments Off | Trackback |
Filed under: California,Cash Back at Closing,Guilty Plea

January 2, 2009

More Loan Modification Myths

Earlier this week I shared my top five myths about loan modifications. Here are five more loan modification myths to keep in mind:

LOAN MODIFICATION MYTH #6: I can quickly modify my loan by calling my lender myself. This “myth” has some truth to it. You can certainly negotiate a loan modification with your lender on your own. However, an attorney who has experience in the field is much more capable than most people at negotiating the best deal possible. Experienced attorneys know what the lenders are willing to negotiate and how far they can be pushed, because they have worked with the lender and other lenders in the industry. Attorneys also carry more legal weight than consumers. With the threat of a possible law suit sitting at the negotiating table, the lender is usually more open to negotiating a reasonable deal.

LOAN MODIFICATION MYTH #7: If the lender doesn’t want to negotiate, it doesn’t have to. Lenders often feel compelled to negotiate a solution with borrowers for the simple reason that they do not want to have bad loans on their books. If they have too many bad loans, their reputation in the industry suffers, and they may have trouble borrowing money to make future loans available. In addition, many loans that are in default contain evidence that the lender or someone else involved in approving the loan acted inappropriately. In cases such as these, the lender is legally obligated to re-negotiate the loan agreement with the borrower. A knowledgeable attorney can perform a forensic audit that often identifies RESPA (Real Estate Settlement Procedures Act) violations that most consumers would never notice on their own.

LOAN MODIFICATION MYTH #8: Up-front fees are a scam. Not paying fees up front is a good rule of thumb for avoiding scams, particularly those involving credit counseling services with some companies that offer loan modification services. If the loan modification company is offering legal representation, however, the rule of thumb changes. Attorneys almost always charge up-front fees in the form of a retainer. The key is to work with a reputable loan modification company that has a reasonable refund policy if it cannot help you. Make sure the company has a mailing address (not just a P.O. Box number or website address) and a phone number, and do some checking to make sure the company is legitimate and has successfully negotiated loan modifications for its clients.

LOAN MODIFICATION MYTH #9: If I do not qualify for a loan modification, I will lose my home. Not everyone qualifies for a loan modification, but other options and exit strategies are always available to help you avoid foreclosure. In fact, most homeowners have about a dozen options they can pursue to either keep their home or get out from under it gracefully. These include placing the home on the market, refinancing out of trouble, borrowing money from a friend or relative to reinstate the loan, and working out a payment plan with the bank (forbearance), to name a few. If you live in a jurisdiction that offers a redemption period, you even have the option of buying back the property from whoever happens to purchase it at the auction. An attorney can help you analyze the various options and offer guidance on which option is best for your situation.

LOAN MODIFICATION MYTH #10: I can only modify the loan on my primary residence. Loan modification is designed for homeowners, not investors, so you have a better chance of negotiating a loan modification for your primary or secondary residence – that is, for a home you actually live in rather than an investment property. However, the mortgage lending industry is in such dire straights now that it cannot afford to have any loans go into default. Lenders are even willing to work with investors in renegotiating their loan agreements.

Remember, you may not be fully aware of the options you have until you do your research. The landscape is constantly changing, and only by consulting with someone knowledgeable in the field of loan modifications can you truly become educated enough to make the best decision.

Posted By: Ralph Roberts @ 7:17 pm | | Comments (4) | Trackback |
Filed under: Loan Modification Myths