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April 28, 2009

U.S. Senate Passes Mortgage Fraud Enforcement Legislation

A federal bill to improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds related to federal assistance and relief programs, has been passed by the United States Senate by a majority of 84-4. Senate Bill 386 (S.386) extends the reach of federal fraud laws into mortgage lending and directs nearly $250 million dollars to federal agencies charged with investigating and prosecuting people and institutions who commit real estate and mortgage fraud.

Similar legislation is pending in the U.S. House of Representatives. Both the Senate and House must agree on a final version of the legislation before it can be signed into law, which President Obama is expected to do.

S. 386 broadens the coverage of current laws against financial crimes, including fraud affecting mortgages. Once signed into law by the President, it would authorize the appropriation of $245 million for each of fiscal years 2010 and 2011 for the Department of Justice (DOJ), the Postal Inspection Service, and other federal agencies to investigate and prosecute violators of the bill’s provisions. For each of those years the bill would authorize:

  • $75 million for the FBI
  • $90 million for offices of the United States Attorneys and the DOJ criminal, civil, and tax divisions
  • $30 million for the Postal Inspection Service
  • $30 million for the Inspector General for the Department of Housing and Urban Development
  • $20 million for the United States Secret Service

S. 386 also would amend certain provisions of the False Claims Act (FCA), which allows private individuals with knowledge of past or present fraud committed against the government to file claims against federal contractors.

Posted By: Ralph Roberts @ 8:45 am | | Comments (5) | Trackback |
Filed under: Legislation,Mortgage Fraud

February 19, 2009

Is Obama’s Foreclosure Plan Ripe for Mortgage Fraud?

Robert L.Image via Wikipedia

If you believe some lawmakers, President Obama’s $75 billion foreclosure rescue plan is an open invitation for people to commit real estate and mortgage fraud. From CBS News:

House Republican leadership and Senator Charles Grassley (R-IA), ranking member of the Senate Finance Committee sent letters to administration officials asking for assurances that anti-fraud measures will be put in place to guarantee that taxpayer dollars are not used to re-do mortgages that were originally based on fraudulent documentation. Grassley notes that experts in mortgage lending say that anywhere from 30-70% of all mortgages inked in the last few years were based on fraudulent claims of assets or income.

The Treasury Department is considering a new computer program developed by Smithfield and Wainwright, a real estate business out of Florida known as “Mo-Mod.” A company spokesperson says the product can modify up to a million loans per month.

Some in the mortgage industry doubt that an automated program could catch fake documentation.

“You’ve got to get a human into there and look at it to underwrite it so that you can properly assess the risk,” Jon Daurio of Kondaur Capital Corporation in Southern California told CBS News. “I do a full documentation. I am verifying that income, getting tax forms, bank statements, etc. and I want to verify that that gross income is accurate,” he said.

But the “Mo-Mod” automated system under consideration by the Treasury Department will not re-examine the original W-2s or paystubs.

Hogan Copeland who goes by the name “Big Hogan” developed “Mo-mod” through his company Smithfield and Wainwright. Copeland told CBS News if his company is involved they will only be conducting appraisals not determining the homeowner’s true income or credit history. “We are not forensic accountants, that’s the bank’s determination, that’s not Big Hogan’s determination,” he said. “We will be evaluating the house, that’s the piece in question, that’s the hottest button right now.”

Copeland says if the government uses “Mo-Mod”, his team of 23,000 “independent and unbiased” appraisers nationwide would immediately begin to appraise foreclosed homes or those on the edge of foreclosure. Copeland notes that his network of appraisers would use a nationwide set of standards based on at least 20 data points to get at the new value of each home, “It’s just coming back to reality,” he said.

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Posted By: Ralph Roberts @ 12:21 am | | Comments (11) | Trackback |
Filed under: Legislation,Mortgage Fraud,Mortgage Meltdown

October 10, 2008

Barak Obamma and Mortgage Fraud Prevention

Back on February 15, 2006, I posted a blog entry titled “Stop Fraud Act: U.S. Senate Tackles Real Estate Fraud,” detailing U.S. Senator Barack Obama’s 2006 proposal to fight real estate and mortgage fraud.

Thanks to a tip from Diana Golobay of HousingWire.com, I ran across the following from Obama’s campaign Web site:

Barack Obama and Joe Biden’s Plan

Protect Homeownership and Crack Down on Mortgage Fraud

Obama and Biden will crack down on fraudulent brokers and lenders. They will also make sure homebuyers have honest and complete information about their mortgage options, and they will give a tax credit to all middle-class homeowners.

Create a Universal Mortgage Credit: Obama and Biden will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.

Ensure More Accountability in the Subprime Mortgage Industry: Obama has been closely monitoring the subprime mortgage situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.

Mandate Accurate Loan Disclosure: Obama and Biden will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

Close Bankruptcy Loophole for Mortgage Companies: Obama and Biden will work to eliminate the provision that prevents bankruptcy courts from modifying an individual’s mortgage payments. They believe that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.

Does knowing that Senator Obama wrote and introduced real estate and mortgage fraud prevention legislation sway or impact your opinion of him in terms of who you might cast your vote for this November?

Posted By: Ralph Roberts @ 7:11 pm | | Comments (4) | Trackback |
Filed under: Legislation,Stop Fraud Act

September 24, 2008

Nationwide Mortgage Fraud Coordinator Act of 2008

If anyone is interested in reading or commenting on H.R. 6853, the Nationwide Mortgage Fraud Coordinator Act of 2008 (which was passed by Congress by a vote of 350-23 earlier this week), here is the full text:

Congress Vote for HR 6853.jpg

Nationwide Mortgage Fraud Coordinator Act of 2008 (Engrossed as Agreed to or Passed by House)

HR 6853 EH

110th CONGRESS
2d Session
H. R. 6853

AN ACT

To establish in the Federal Bureau of Investigation the Nationwide Mortgage Fraud Coordinator to address mortgage fraud in the United States, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Nationwide Mortgage Fraud Coordinator Act of 2008′.

SEC. 2. ESTABLISHMENT IN THE FEDERAL BUREAU OF INVESTIGATION OF THE NATIONWIDE MORTGAGE FRAUD COORDINATOR.

(a) Establishment- The Director of the Federal Bureau of Investigation shall assign the Chief of its Financial Crimes Section, Criminal Investigative Division, in addition to other assigned duties, to be the Nationwide Mortgage Fraud Coordinator.

(b) Duties of the Coordinator- The Nationwide Mortgage Fraud Coordinator shall oversee all Federal Bureau of Investigation activities related to the investigation of mortgage fraud, including the following:

  1. Establishing and operating regional task forces, consisting of the voluntary participation of Federal, State, and local law enforcement and prosecutorial agencies, to organize initiatives to investigate mortgage fraud, including initiatives to enforce all pertinent Federal and State mortgage fraud laws.
  2. Providing training to Federal, State, and local law enforcement and prosecutorial agencies with respect to mortgage fraud, including related Federal and State laws.
  3. Collecting and disseminating data with respect to mortgage fraud, including, to the extent practicable, Federal, State, and local data relating to mortgage fraud investigations and prosecutions.
  4. Preparing an annual report describing the Federal Bureau of Investigation’s efforts to combat mortgage fraud and the results of these efforts. This report shall be submitted by the Federal Bureau of Investigation to Congress. The initial report shall be submitted no later one year after the date of the enactment of this Act.
  5. Making recommendations to the Director as to the need for resources to combat mortgage fraud.

  6. Performing other duties as assigned that are related to the investigation and prosecution of mortgage fraud.

(c) Optional Functions- The Nationwide Mortgage Fraud Coordinator shall have the following optional responsibilities:

  1. Establishing a toll free hotline and other information systems for–
  2. (A) receiving reports of mortgage fraud;

    (B) providing the public with access to information and resources with respect to mortgage fraud; and

    (C) directing reports or allegations of mortgage fraud to the appropriate Federal, State, or local law enforcement and prosecutorial agency, including any appropriate regional task force.

  3. Creating a database with respect to suspensions and revocations of mortgage industry licenses and certifications to facilitate the sharing of such information by States.

(d) Optional Responsibility of the Department of Justice- The Department of Justice, upon consideration of any recommendations by the Nationwide Mortgage Fraud Coordinator, may–

  1. propose legislation to Federal, State, and local legislative bodies to assist in the detection, investigation, and prosecution of mortgage fraud, including measures to address mortgage loan procedures and property appraiser practices that provide opportunities for mortgage fraud; and
  2. make recommendations to Congress as to the need for additional resources to combat mortgage fraud.

(e) Sunset- This section shall sunset September 30, 2015.

Passed the House of Representatives September 22, 2008.

Posted By: Ralph Roberts @ 10:44 am | | Comments (7) | Trackback |
Filed under: Legislation,Mortgage Fraud

July 23, 2008

President Bush Set to Sign American Housing Rescue & Foreclosure Prevention Act

Speaking to reporters by phone during this morning’s White House Press Briefing, White House spokeswoman Dana Perino said President Bush is now prepared to sign the American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, which is expected to receive full Congressional approval by this time tomorrow. According the legislation, H.R. 3221 will help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

To shore up the housing market and ensure the availability of affordable home loans, H.R. 3221 would put a new, independent regulator in charge of housing Government Sponsored Enterprises (i.e., GSEs — Fannie Mae, Freddie Mac, and the Federal Home Loan banks), which is said to be vital to both the financial markets and homeowners. The new regulator is expected to be far better prepared than the current system is to quickly and effectively respond to issues affecting the safe and sound operation of Fannie Mae, Freddie Mac, and Federal Home Loan banks.

The centerpiece of the bill provides assistance to a large number of homeowners now in danger of losing their homes. Lower-cost government-insured mortgages–which Congressional leaders say come at no cost to the American taxpayer–will be offered if President Bush signs the Bill into law, but according to the Congressional Budget Office estimates, the plan could cost taxpayers around $25 billion.

Specifically, the American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, includes the following provisions:

FHA Housing Stabilization and Homeownership Retention Act

  1. Provides mortgage refinancing assistance to keep at least 400,000 families from losing their homes, to protect neighboring home values, and to help stabilize the housing market at no cost to American taxpayers.
  2. Expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government-insured mortgages they can afford to repay.
  3. Protects taxpayers by requiring lenders and homeowners to take responsibility. This is not a bailout, legislators say; in order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal.
  4. In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.
  5. Contains critical protections for taxpayers’ dollars, including higher refinancing fees that establish a new FHA reserve to cover possible losses from defaults on these government-backed mortgages.
  6. Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced.
  7. Provides $180 million for financial counseling and legal assistance to help families stay in their homes.

Strengthening Regulations of the GSEs

  1. Puts an independent regulator in place with what are said to be significant responsibilities and powers so that Fannie Mae and Freddie Mac can safely and soundly work to provide families with affordable housing.
  2. The new regulator will have enhanced authority to raise capital standards, set strict prudential standards, including internal controls, audits, and to enforce these new standards and promptly take corrective action.
  3. The new regulator will oversee, and can directly restrict, executive compensation at Fannie Mae and Freddie Mac.
  4. Raises the GSE loan limits for single family homes to create more affordable mortgage loans for moderately priced homes by allowing GSE loans up to 115% of the local area median home price, and to make GSE loans effective in high cost areas by raising the permanent loan limit from $417,000 to $625,500.
  5. Creates a new permanent affordable housing trust fund–financed by the GSEs and not by taxpayers–to fund the construction, maintenance and preservation of affordable rental housing for low and very low-income individuals and families nationwide in both rural and urban areas.

Backstopping Fannie Mae and Freddie Mac To Shore Up the Housing Market

  1. Gives the Secretary of the Treasury the authority to increase the already existing line of credit to Freddie and Fannie for the next 18 months, as well as giving the Treasury Department standby authority to buy stock in those companies to provide confidence in the GSEs and stabilize housing finance markets.
  2. Includes taxpayer protections directing the Treasury Department to take the following into account, when using these authorities: A) Taxpayers should be first in line for being paid back, before other shareholders; and, B) There should be restrictions on dividends for shareholders and on compensation for the executives of the GSE’s until taxpayers are fully reimbursed.
  3. Strengthens oversight by requiring the Federal Reserve and Treasury to consult with the new regulator on issues concerning the safety and soundness of the GSEs and use of the standby authority.

Stabilizing Neighborhoods Hurt by the Foreclosure Crisis

  1. Provides $4 billion in emergency assistance (CDBG Funds) to communities hardest hit by the foreclosure and subprime crisis to purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem the significant losses in home values of neighboring homes.
  2. Foreclosed and rehabilitated homes would be sold or rented to moderate-income individuals and families–those whose incomes do not exceed 120% of the area median income. At least 25% of the funds would be targeted to house low-income and very low-income persons and families–those whose incomes do not exceed 50% of area median income.
  3. Any profit from the sale, rental, rehabilitation or redevelopment of these properties must be reinvested in affordable housing and neighborhood stabilization.
  4. Provides $180 million for pre-foreclosure counseling, to be distributed in grants by the Neighborhood Reinvestment Cooperation (NeighborWorks), with 15% targeted for low-income and minority homeowners and neighborhoods, and $30 million in grants for legal counseling to assist homeowners in foreclosure.

Preventing Future Abuses and Crises

  1. Establishes a nationwide loan originator licensing and registration system that will set minimum standards for loan originator licensing substantially improving the oversight of mortgage brokers and bank loan officers.
  2. Establishes improved mortgage disclosure requirements that will help ensure that mortgage borrowers understand their mortgage loan terms.

FHA Modernization

  1. Expands affordable mortgage loan opportunities for families (many of whom would otherwise turn to subprime lenders) and for seniors through expanded access to reverse mortgages through Federal Housing Administration reform.
  2. Raises FHA loan limits to create affordable mortgage loans for moderately priced homes by allowing FHA loans up to 115% of the local area median home price, and to make GSE loans more available in high cost areas by raising the permanent loan limit from $362,790 to $625,500.
  3. Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans, by increasing the loan limit for the program, reducing and capping lender fees for such loans, and strengthening consumer protections limiting the sale of other financial products in conjunction with FHA reverse mortgage loans.
  4. Prevents HUD from raising single family loan fees on lower and middle-income borrowers, and from raising loan fees on FHA rental housing loans.

Preserving the American Dream for Our Nation’s Veterans

  1. Increases VA Home Loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.
  2. Helps returning soldiers avoid foreclosure and stay in their home by lengthening the time a lender must wait before starting foreclosure, from three months to nine months after a soldier returns from service and providing returning soldiers with one-year relief from increases in mortgage interest rates.
  3. Requires the Department of Defense to establish a counseling program for veterans and active service members facing financial difficulties and provides a moving benefit to servicemen and women who are forced to move out because their rental housing was foreclosed on.
  4. Increases benefits paid to veterans with disabilities, such as blindness, to adapt their housing and allows the Veterans Administration to provide for improvements to homes of veterans with service-connected disabilities.

Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720)

  1. Provides $15 billion in tax benefits, including tax credits to first-time homebuyers, a real property tax deduction for non-itemizers, an additional $11 billion in mortgage revenue bonds for states, and improves access to low-income housing.
  2. Gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
  3. Provides taxpayers that claim the standard deduction with up to an additional $500 ($1,000 for a joint return) standard deduction for property taxes in 2008.
  4. Temporary increase in mortgage revenue bond authority to allow for the issuance of an additional $11 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.
  5. Temporary increase in low-income housing tax credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.

The Wall Street Journal reports this morning that President Bush’s support of the measure is a “dramatic split” for both Bush and congressional Republicans, many of whom the Journal says are “angrily opposed to the housing legislation, which they call a handout for irresponsible homeowners and unscrupulous lenders.” President Bush had voiced earlier objections to a provision that would give grants for local governments to purchase and refurbish foreclosed properties–a provision the White House feels amounts to nothing more than a bailout. But White House spokeswoman Perino said today that President Bush doesn’t feel this is the right time for a “…prolonged veto fight, but we are confident the President would prevail in one.”

May 20, 2008

Overview: Federal Housing Finance Regulatory Reform Act of 2008

The U.S. Senate Committee on Banking, Housing, and Urban Affairs, yesterday announced they reached an agreement on legislation entitled “The Federal Housing Finance Regulatory Reform Act of 2008,” which includes efforts to:

  1. Help prevent the rising number of foreclosures
  2. Create more affordable housing for consumers
  3. Reform the regulation of the government-sponsored enterprises (GSEs) in order to improve their role in the housing finance system

According to CNNMoney.com, provisions of the proposed legislation include:

  • Allowing the Federal Housing Administration to insure $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers’ homes.
  • Stricter oversight of Fannie Mae and Freddie Mack. The two government-sponsored enterprises guarantee the purchase and sale of home mortgages in the secondary market.

The new FHA program could benefit an estimated 500,000 people, reports CNNMoney.com. It could cost as much as $500 million, which would be paid for by Fannie and Freddie. If it turns out the costs fall below that level–that is, should few if any borrowers default on their new FHA loans–the funds from Fannie and Freddie would be redirected back to the affordable housing trust fund.

The Senate Banking Committee is scheduled to debate and vote on the bill later today. The measure is certain to pass at both the committee and full Senate levels in time to go to President Bush before the July 4 congressional recess, reports CNNMoney.com. It remains an open question whether President Bush would support the bill. He did, after all, threaten to veto a similar bill sponsored by Congressman Barney Frank and passed by the House of Representatives several weeks ago. But Senator Dodd said that while the Bush White House hasn’t endorsed his bill yet, “there’s been some positive reaction out of the White House.”

Posted By: Ralph Roberts @ 6:07 am | | Comments (4) | Trackback |
Filed under: Foreclosure,Legislation,Mortgage Meltdown

May 9, 2008

President Bush Vows to Veto Comprehensive Housing Package

Defying veto threats from the Bush administration, the U.S. House of Representatives yesterday passed a comprehensive measure in response to the mortgage crisis. The American Housing Rescue and Foreclosure Prevention Act (H.R. 3221) appears to respond directly to the current crisis facing middle class Americans while providing many of the tools necessary to prevent a repeat of these problems. President Bush has threatened to veto the roughly $300 billion package, arguing it would “reward speculators and lenders.”

The legislation combines a number of bipartisan bills including measures to modernize the FHA and reform the GSEs, which will provide crucial liquidity to our mortgage markets now, and also strengthen regulation and oversight for the future. In addition, the package could help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

Summary of H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act

Amendment 1: FHA Housing Stabilization and Homeownership Retention Act (H.R. 5830)

  • Provides mortgage refinancing assistance to keep families from losing their homes, protect neighboring home values, and help stabilize the housing market.
  • Expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government -insured mortgages they can afford to repay. This legislation will help troubled borrowers avoid foreclosure while minimizing taxpayer exposure.
  • Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced.
  • Protects taxpayers by requiring lenders and homeowners to take responsibility. This is not a bailout; in order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal. In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.
  • Contains important protections for taxpayers’ dollars, including higher refinancing fees that establish a new FHA reserve to cover possible losses from defaults on these government-backed mortgages.
  • Provides $230 million for financial counseling to help families stay in their homes.

FHA Modernization (H.R. 1852)

  • Expands affordable mortgage loan opportunities for families (many of whom would otherwise turn to subprime lenders) and for seniors through expanded access to reverse mortgages through Federal Housing Administration reform.
  • This measure passed the House in September. (Expanding American Homeownership Act of 2007, H.R.1852)

GSE Reform (H.R. 1427)

  • Strengthens regulation of Fannie Mae and Freddie Mac, and the Federal Home Loan Bank system.
  • Raises the GSE loan limits for single family homes in high cost areas, so that these entities can purchase more loans in higher cost areas (thereby lowering interest rates for new homes and refinancings in those areas).
  • Expands liquidity in the mortgage markets by buying loans already made, freeing up money for new mortgages and refinances.
  • Creates a new Fund to boost the nation’s stock of affordable rental housing.

Encouraging Mortgage Modifications/Castle Bill (H.R. 5579)

  • Mortgage servicers are concerned about the threat of investor lawsuits if they help families in danger of losing their homes with loan modifications that reduce monthly mortgage payments through lower interest rates, reduced principal amounts or other changes in loan terms.
  • To speed loan modifications and keep more families in their homes, this package includes HR 5579 to provide mortgage servicers with clarity and certainty for their actions, and protection from such lawsuits for specified loan modifications.

Preserving the American Dream for Our Nation’s Veterans

  • Increases VA Home Loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.

Amendment 2– Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720): This amendment provides $11 billion in tax benefits, including tax credits to first-time homebuyers, a real property tax deduction for non-itemizers, an additional $10 billion in mortgage revenue bonds for states, and improves access to low-income housing.

  • Gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $70,000 ($140,000 in the case of a joint return).
  • Provides taxpayers that claim the standard deduction with up to an additional $350 ($700for a joint return) standard deduction for property taxes in 2008.
  • Temporary increase in mortgage revenue bond authority to allow for the issuance of an additional $10 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.
  • Temporary increase in low-income housing tax credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.
  • Helps returning soldiers avoid foreclosure by lengthening the time a lender must wait before starting foreclosure, from three months to one year after a soldier returns from service.
  • Would not add to the national debt. The cost of this bill is offset with a tax compliance provision included in the President’s Budget and by delaying the effective date of a tax benefit for multinational companies that has not yet taken effect.

Amendment 3–Miller/LaTourette

  • This amendment protects the right of states and cities to regulate the foreclosure process and the treatment of foreclosed property — by clarifying that this act, the National Bank Act, and the Home Owner’s Loan Act do not preempt State foreclosure laws for national banks or federally chartered thrifts.
  • Exempting national banks and thrifts from foreclosure law would deprive the states and cities of the right to require that foreclosures must follow certain procedures, including notice to the people foreclosed, and that foreclosed property be safely maintained.
  • Many in the industry and in the Bush administration argue that national banks should be exempted from these rules. There is no reason that national banks and federal thrifts should be treated differently from all other mortgage holders when it comes to how to foreclose and how to maintain foreclosed property.
Posted By: Ralph Roberts @ 12:26 pm | | Comments (1) | Trackback |
Filed under: Legislation,Mortgage Meltdown

February 28, 2008

Michigan passes loan officer registration legislation; State’s police train officers on investigating real estate fraud

Great news out of the state of Michigan this morning. The state’s Senate and House of Representatives has approved a series of bills, which if enacted by the Governor, will create a validating registration process for Michigan mortgage loan officers. As reported earlier week by Crain’s Detroit Business, the bills require loan officers to meet specific and measurable educational requirements, register with the Michigan Office of Financial and Insurance Regulation, and undergo a criminal background check. The newly passed legislation also include measures that prohibit loan officers from engaging in fraud, intentionally failing to provide borrowers with required information, or issuing false or misleading ads about mortgage loans or their availability, according to Crain’s.

In a press release issued yesterday afternoon by the Michigan Mortgage Lenders Association (MMLA), Dan Grzywacz, MMLA’s president said that enactment of the legislation “will be very effective in removing the small minority of ‘bad actors’ from the mortgage origination business and will enhance the skills and professionalism of loan officers.

Under the passed legislation, registered loan officers will be included in a national database in order to track their registration status and compliance record. This national database is expected to help thwart bad loan officers who travel or move across state borders to continue their unscrupulous practices.

Hats off to the Michigan Senate and House of Representatives for passing these important measures!

In related news, Michigan State Police (MSP) investigators report that they are now better prepared to handle cases of mortgage fraud following a two-day mortgage fraud investigation and prosecution training held earlier this week in Livonia, Michigan. The training, which was a cooperative effort between the MSP, Michigan Attorney General’s Office and the mortgage industry, drew more than 40 law enforcement officers and mortgage industry personnel.

With mortgage fraud becoming more prevalent, it is important that investigators have the tools needed to both identify it and build a case against an offender,” says Detective First Lieutenant Marty Bugbee, commander of the MSP Criminal Investigation Section.

Developed specifically to address mortgage fraud in Michigan, the training consisted of classroom instruction and scenario-based workshops. Officers learned how to identify fraudulent activity, as well as advanced investigative techniques that will lead to a higher likelihood of prosecution.

Here again, hats to to the Michigan State Police (MSP) for conducting this type of training and for engaging in the process of planning future training sessions for additional law enforcement personnel. Great Job!

Posted By: Ralph Roberts @ 12:43 pm | | Comments (3) | Trackback |
Filed under: Legislation,Michigan,Mortgage Fraud,Real Estate Fraud

February 1, 2008

Friday’s Real Estate & Mortgage Fraud Round-Up

Some mortgage fraud cases will not be criminally prosecuted!: Amid all the anguish arising from the swelling volume of home foreclosures in and around Stockton, California, there has been much talk about real estate fraud. But most of the complaints cannot be criminally prosecuted, representatives of the San Joaquin County Office of the District Attorney said yesterday.

Foreclosure vultures prey on Portland, Oregon, homeowners: As national foreclosure rates hit their highest levels ever, people calling themselves “foreclosure consultants,” are filling Craigslist, billboards and mailers with offers to “save your home.” Detective Liz Cruthers, who investigates white-collar crimes for the Portland, Oregon, Police Bureau, says she’s spending much of her time learning the intricacies of “mortgage rescue fraud” and chasing down the bad guys.

Utah seeks stiffer penalties for real estate fraud: A Utah legislative committee is recommending the passage of a bill aimed at increasing criminal and civil penalties against people involved in mortgage fraud. The Senate Business and Labor Standing Committee on Tuesday unanimously approved SB134 for further consideration by the state Legislature.

FBI targets mortgage fraud in Hawaii: The FBI has opened multiple mortgage fraud investigations in Hawai’i as a result of the fallout from the nation’s subprime mortgage crisis, the bureau’s director said yesterday. FBI Director Robert S. Mueller III, speaking to reporters on a stopover following a trip to Asia, confirmed the subprime mortgage mess has reached Hawai’i.

Countrywide accused of mortgage fraud: Already burned in the subprime mortgage meltdown, lending giant Countrywide Financial Corp. is now under investigation in Florida for possible unfair and deceptive trade practices, state officials said Thursday. Officials say they have received more than 150 formal complaints about Countrywide since setting up a mortgage fraud hotline last year.

Arrest made in Erie, Pennsylvania, real estate fraud case: A key figure in an ongoing federal investigation into suspected mortgage fraud in the city of Erie, Pennsylvania, will plead guilty to fraud and money-laundering charges. The U.S. Attorney’s Office in Erie on Thursday filed criminal charges against Frank Kartesz II. Kartesz, 39, is accused of one count each of mail fraud and criminal conspiracy to commit mail fraud, wire fraud and bank fraud. The government alleges he was part of a scheme in which he and others bought run-down houses and sold them at artificially inflated prices. Most of the buyers were low-income people who knew little about the home-buying process.

Illinois mortgage broker in jail for selling credit histories: Homeowners already worried about with a slumping real estate market and tighter restrictions on home loans should look to the case of an Illinois mortgage broker as another cautionary tale.

Georgia real estate appraiser sentenced to prison for mortgage fraud: After submitting fraudulent appraisals on incomplete houses as part of a mortgage fraud scheme, a Georgia real estate appraiser has been sentenced to prison.

January 15, 2008

Missouri and Mortgage Fraud

Under a new plan announced earlier this week by the State of Missouri, anyone who commits real estate or mortgage fraud against Missouri homebuyers could soon be living in a new home themselves: prison.

Missouri Governor Matt Blunt announced new initiatives to protect his state’s homeowners and strengthen the penalties against anyone who commits real estate or mortgage fraud. He also established a free hotline for Missourians to report fraud and access information to protect themselves against foreclosure.

As we’ve been preaching here on FlippingFrenzy.com since day one in our effort to raise awareness of the problems associated with real estate and moretgage fraud, homeownership is an essential part of the American dream, and for many families, buying a home is the biggest financial investment they will ever make. Missouri’s plan is aimed at helping at-risk homeowners keep their homes by providing new consumer protections and creating stiff penalties for the scammers who commit real estate and mortgage fraud.

Governor Blunt’s proposal includes legislation that will further enhance consumer knowledge, protect against unscrupulous businesses that prey upon at-risk homeowners, and create new punishments for mortgage fraud. In particular, the Governor has proposed:

  • Giving the state’s Real Estate Commission and Real Estate Appraisers Commission power to suspend or revoke industry insider’s licenses for mortgage fraud
  • Creating the crime of mortgage fraud, a class C felony, punishable by up to seven years in prison
  • Enhancing notice requirements for foreclosure by requiring that homeowners at-risk are provided with a clear statement informing them of the hotline so that they may receive more information on how to avoid foreclosure
  • Enhancing consumer protection laws to protect Missourians from exploitative foreclosure consultants
  • Providing the state’s commissioner of the Division of Finance power to issue cease-and-desist orders to stop real estate and mortgage fraud or exploitative business practices against at-risk Missouri homeowners

Missourians at risk of foreclosure or who suspect they are victims of real estate or mortgage fraud can call a toll-free hotline (1-888-246-7225) to obtain information, materials, and contact information to help avoid foreclosure and report fraud.

Posted By: Ralph Roberts @ 11:53 pm | | Comments (0) | Trackback |
Filed under: Foreclosure Fraud,Legislation,Missouri,Mortgage Fraud,Real Estate Fraud

December 13, 2007

Homeownership Preservation and Protection Act of 2007

As a part of a comprehensive strategy he says will “protect, preserve and promote the American dream of homeownership,” U.S. Senator Christopher Dodd yesterday introduced legislation to help put an end to the abusive and predatory lending practices that have sent nearly a million Americans into foreclosure and put just as many more in danger of losing their homes.

The Homeownership Preservation and Protection Act of 2007, which is cosponsored by no less than a dozen of Dodd’s counterparts in the Senate, enjoys support from the National Community Reinvestment Coalition (NCRC), the National Association for the Advancement of Colored People (NAACP), the American Association of Retired Persons (AARP), and the Center for Responsible Lending, among others. From the way the Bill reads today, the Homeownership Preservation and Protection Act of 2007 will:

  1. Establish new protections for all borrowers. It will prohibit brokers from steering prime borrowers to more expensive subprime loans, create a fiduciary duty for mortgage brokers towards borrowers, and provide for a duty of good faith and fair dealing toward borrowers for all lenders.
  2. Establish new protections for subprime borrowers and borrowers who get nontraditional mortgages. It will require a real analysis of the borrowers’ ability to repay the loan. The bill prohibits prepayment penalties and Yield Spread Premiums (YSPs) on these loans, and requires that these loans provide a net tangible benefit to the borrower.
  3. Provide strong remedies to make sure these standards are met. It will allow state attorneys general enforce the provisions of the law, and does not preempt state law.
  4. Provide for limited liability for holders of a mortgage made in violation of law, whether it is the original lender or a subsequent investment trust. Unlike current law, which puts the burden on the borrower to find the party responsible for causing the harm, the legislation allows the borrower to go directly to the current mortgage holder for a cure.

    The U.S. House of Representatives has already passed a similar measure. H.R. 3915, which was approved by House members on a part-line vote on November 15, essentially calls for the following:

    1. Prohibits steering incentives to mortgage originators, including incentive compensation and any yield spread premium based on, or varying with, the terms of a residential mortgage loan.
    2. Prohibits mortgage originators from steering any consumer to a residential mortgage loan that is not in the consumer’s interest (loans with predatory characteristics).
    3. Sets forth licensing and registration requirements for mortgage originators.
    4. Requires creditors to determine, based on verified and documented information, that a consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, insurance, and assessments.
    5. Prohibits creditors from extending credit for residential mortgage loans that involve refinancing of a prior residential mortgage loan unless the creditor determines that refinancing provides a net tangible benefit to the consumer.
    6. Sets forth defenses to foreclosure.
    7. Revises requirements governing prepayment penalties (it essentially prohibits lending without due regard to repayment ability).

    Clearly, there are differences in both pieces of legislation. Inman News reports Dodd’s bill “would require loan servicers to implement loss mitigation strategies before initiating foreclosure proceedings against borrowers,” and would “require lenders to follow existing federal guidelines for subprime and nontraditional mortgage loans, and lower the threshold for loans to fall under even stricter requirements for high cost mortgages as defined by the Home Ownership Equity Protection Act, or HOEPA.”

    But like legislation approved by the House on Nov. 15, Dodd’s bill would limit the “assignee liability” of investors who buy securities backed by mortgage loans, protecting them from class-action suits by borrowers, Inman reports.

    On the House side, H.R. 3915, creates a national registration system for mortgage originators and requires background checks, fingerprinting, education and testing; whereas Dodd’s the bill introduced by Dodd in the Senate includes no such provision, Inman also reported.

    Inman’s analysis of Dodd’s legislation also reveals the following: “Absent from both bills is language advocated by mortgage lenders and the Bush administration that would create uniform national standards for mortgage originators preempting state laws, in order to eliminate what critics say is a patchwork of regulations that varies from state to state. Without a uniform standard, states would be allowed to adopt stricter rules for lenders not regulated at the federal level.”

    Kieran Quinn, Chairman of the Mortgage Bankers Association (MBA) expressed concerns yesterday about Dod’s proposal. In a prepared statement, she said:

    “The introduction of this bill is an important development as it will jumpstart the debate in the Senate over how to prevent a reoccurrence of the current troubles facing the mortgage market. We are still reviewing the specific language in the bill, but there are several provisions that concern us deeply. Senator Dodd’s bill does not provide a uniform national standard to protect consumers from predatory lending, a step we feel is necessary to ensure a smooth and efficient marketplace. Further, we are troubled by the bill’s ‘duty of care’ and assignee liability requirements.

    For its part, the NCRC shot back with a prepared statement of its own. John Taylor, NCRC President & CEO:

    We support Senator Dodd’s bill aimed at improving the regulation of the housing market to ensure that working families are able to secure and sustain homeownership. If passed in its present form, Senator Dodd’s bill will create strong accountability measures among brokers, lenders and Wall Street investors and will protect American families from unfair and deceptive lending practices.

October 1, 2007

Mortgage Fraud: Strengthening Federal and State Mortgage Fraud Prevention Efforts

The Mortgage Bankers Association (MBA) today released “Mortgage Fraud: Strengthening Federal and State Mortgage Fraud Prevention Efforts,” a new report designed to inform and shape the debate surrounding important issues affecting the real estate finance industry. This paper takes a comprehensive look at the policy discussion surrounding fraud against lenders, a critical issue in today’s mortgage market.

As Flipping Frenzy reported last month, President Bush recently went on record with a statement that his administration would pursue fraud and wrongdoing throughout the mortgage lending industry. Whether it’s fraud for housing or the more serious fraud for profit, scammers and fraudsters are deceiving lenders at an alarming rate, and more must be done to combat the problem.

The FBI has estimated that fraud cost mortgage lenders as much as $4.2 billion in 2006 alone. This growing trend is troubling for many reasons, but most significantly because fraud-related costs and losses incurred by lenders are ultimately passed on to their customers, increasing the cost of homeownership for all borrowers. The Financial Crimes Enforcement Network (FinCEN), a bureau under the U.S. Department of the Treasury has reported that the number of mortgage-related Suspicious Activity Reports (SARs) filed has increased an average of nearly 60 percent per year over the past four years.

Mortgage Fraud: Strengthening Federal and State Mortgage Fraud Prevention Efforts” seeks to separate the issue of mortgage fraud from predatory lending and to provide policymakers with a roadmap to effectively combat the growing incidence of mortgage fraud. In the paper, the MBA discourages adding to or modifying the already comprehensive list of federal fraud statutes and instead recommends that Congress increase resources available to law enforcement and help facilitate the coordination of federal and state law enforcement of financial crimes.

The Mortgage Bankers Association argues that we do not need more federal laws to combat fraud. Instead, says the MBA, what is needed is a coordinated effort and more resources to investigate and prosecute. Good point, but we also need more resources for educating Real Estate industry insiders and consumers. In addition to being illegal and costly, we know that fraud has also contributed to the recent rise in delinquencies and foreclosures, and the industry and government must step up the anti-fraud effort, which includes education and awareness, to help curtail these related problems.

A PDF version of “Mortgage Fraud: Strengthening Federal and State Mortgage Fraud Prevention Efforts” can be downloaded by clicking here.

September 6, 2007

Massachusetts Takes Action: State Permanently Bans For-Profit Foreclosure Rescue Transactions

Massachusetts Attorney General, Martha Coakley, has filed a regulation with her state’s Secretary of State’s Office that permanently bans for-profit foreclosure rescue transactions in the state of Massachusetts. The Massachusetts Consumer Protection Act authorizes the Attorney General to promote regulations to identify unfair or deceptive conduct that violates the act. The new regulation, which goes into effect immediately, prohibits predatory, for-profit foreclosure rescue transactions.

Foreclosure rescue transactions between family members or arranged by a non-profit community or housing organization are not banned under the new regulation.

The new regulation also makes it an unfair or deceptive act to market foreclosure-related services without a precise description of exactly how the company will assist homeowners in avoiding or delaying foreclosure. (The regulations define a “Foreclosure Rescue Transaction” as a transaction designed to avoid foreclosure and where the homeowner transferring the property maintains an option to reacquire the home by maintaining a legal interest in the home.)

On June 1 of this year, Massachusetts’ Attorney announced emergency regulations that placed a temporary ban on these types of unfair and deceptive foreclosure rescue schemes as part of her multi-faceted plan to address the foreclosure rescue crisis in Massachusetts. The regulations went into effect immediately and were valid for 90-days. After a public hearing held last Thursday in Boston, the regulations were promoted as final.

As everyone who reads Flipping Frenzy should know by now, foreclosure rescue schemes are typically initiated when businesses or professionals claim to assist homeowners who are facing foreclosure by convincing them to convey their property to straw purchasers. The straw purchasers then obtain mortgage loans, permitting the individuals facing foreclosure to continue living in their property for a limited time, and promising the individuals that they will be able to later reacquire their homes. Far too often, the promises of maintaining home ownership are illusory and homeowners lose their home to the so-called “rescuer.”

In addition to permanently banning foreclosure rescue transactions, Attorney General Coakley announced earlier this month regulations to address unfair and deceptive tactics used in the mortgage industry. Hearings will be held across the state on the proposed regulations throughout the month of September. The Attorney General’s Office anticipates that promotion of new mortgage regulations will occur by the end of September 2007.

Posted By: Ralph Roberts @ 1:19 pm | | Comments (2) | Trackback |
Filed under: Foreclosure,Foreclosure Fraud,Legislation,Massachusetts,Mortgage Fraud

September 5, 2007

Don’t Mess With Texas: Texas Residential Mortgage Fraud Task Force is now in Session!

Texas’ Attorney General and officials from state regulatory agencies today convened the Texas Residential Mortgage Fraud Task Force, a strategic partnership intended to improve collaboration among residential mortgage regulators and law enforcement officials. Task force members, including the attorney general and real estate, banking and consumer credit regulators, gathered to examine how to track and reduce mortgage fraud in Texas.

The Texas Residential Mortgage Fraud Task Force was created under House Bill 716, which was passed during the state’s most recent legislative session. The 2007 legislation is intended to reduce false or misleading information on residential home loan applications by increasing cooperation among regulators and requiring new disclosures at closing.

Effective September 1 of this year, Texas’ mortgage lenders, bankers and brokers are required to warn loan applicants about the legal consequences of knowingly supplying false information on a residential loan application. Additionally, with the consent of a local district attorney, the state’s attorney general is granted concurrent jurisdiction to prosecute criminal mortgage fraud cases, including those involving money laundering, loan document falsification, and mail or wire fraud.

In Texas, criminal mortgage fraud includes illegally inflating property appraisals; concealing a second mortgage from a primary lender; and concealing or stealing a borrower’s identity. Under the state’s Deceptive Trade Practices Act, the Office of the Attorney General has authority to prosecute misleading practices and is reported to have already recovered millions of dollars for Texans harmed by title scams, undisclosed costs, and other unlawful mortgage-related schemes.

State agencies and officials represented on the Texas Residential Mortgage Fraud Task Force include: the Attorney General; the Consumer Credit Commissioner; the Banking Commissioner; the Credit Union Commissioner; the Commissioner of Insurance; the Savings and Mortgage Lending Commissioner; the Texas Real Estate Commission; and the Texas Appraiser Licensing and Certification Board.

Earlier this year, Texas’ attorney general obtained $21 million in restitution for Texans harmed by lending giant Ameriquest Mortgage Co.s deceptive lending practices. The settlement resolved allegations that Ameriquest and its affiliates did not adequately disclose certain terms to homeowners, including whether loans carried fixed or adjustable rates. According to court documents filed by the Office of the Attorney general, Ameriquest also charged excessive origination fees and prepayment penalties, refinanced borrowers into improper loans and inflated appraisals that qualified borrowers for loans.

In 2006, Texas’ Attorney General negotiated an agreement with Green Tree Servicing L.L.C., a Minnesota-based firm that services manufactured housing debts in Texas. Under the settlement, Green Tree agreed to assist more than 1,200 Texas homeowners who may have been issued invalid titles to homes they purchased from more than 115 unlicensed retailers in 2003. In a related move, the Attorney General secured an injunction and asset freeze against the unlicensed sellers.

The Office of the Attorney General has also halted scams purporting to save homeowners’ properties from condemnation. It has also cracked down on various title-related and refinancing scams.

Posted By: Ralph Roberts @ 8:01 pm | | Comments (1) | Trackback |
Filed under: Legislation,Mortgage Fraud,Real Estate Fraud,Texas

August 31, 2007

President Bush Addresses Real Estate and Mortgage Fraud

President George W. Bush issued the following statement today:

This administration will soon issue regulations that require mortgage brokers to fully disclose their fees and closing costs. We’re pursuing wrongdoing and fraud in the mortgage industry through the Department of Housing and Urban Development, the Department of Justice, the Federal Trade Commission, and other agencies. In other words, if you’ve been cheating somebody we’re going to find you and hold you to account. And we’ll continue to do our part to help improve all aspects of the mortgage marketplace that is really important to this economy of ours.

Bush’s statement, which was made while addressing the media on the larger issue of homeownership financing, is his first related to real estate and mortgage fraud that I could recall. The President, who was joined by Department of Housing and Urban Development Secretary Alfonso Jackson, and Henry Paulson Jr., Secretary of the Department of Treasury, also said:

Economic growth is healthy, and just yesterday we learned that our economy grew at a strong rate of 4 percent in the second quarter of this year. Wages are rising, unemployment is low, exports are up, and steady job creation continues.

And…

We [Bush, Jackson, and Paulson]… had a good discussion about the situation in America’s financial markets. … One area that has shown particular strain is the mortgage market, especially what’s known as the sub-prime sector of the mortgage market. This market has seen tremendous innovation in recent years, as new lending products make credit available to more people. For the most part, this has been a positive development, and the reason why is millions of families have taken out mortgages to buy their homes, and American homeownership is at a near all-time high.

Unfortunately, there’s also been some excesses in the lending industry. One of the most troubling developments has been the increase in adjustable rate mortgages that start out with a very low interest rate and then reset to a higher rate after a few years. This has led some homeowners to take out loans larger than they could afford based on overly optimistic assumptions about the future performance of the housing market. Others may have been confused by the terms of their loan, or misled by irresponsible lenders. Whatever the reason they chose this kind of mortgage, some borrowers are now unable to make their monthly payments, or facing foreclosure.

And…

The recent disturbances in the sub-prime mortgage industry are modest… But if you’re a family–if your family is one of those having trouble making the monthly payments–this problem doesn’t seem modest at all. I understand these concerns, and therefore, I’ve made this a top priority to help our homeowners navigate these financial challenges, so that many families as possible can stay in their homes. That’s what we’ve been working on, a plan to help homeowners.

And…

We’ve got a role, the government has got a role to play — but it is limited. A federal bailout of lenders would only encourage a recurrence of the problem. It’s not the government’s job to bail out speculators, or those who made the decision to buy a home they knew they could never afford.

And…

In the coming days, the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages.

And…

I’m going to work with Congress to temporarily reform a key housing provision of the federal tax code, which will make it easier for homeowners to refinance their mortgages during this time of market stress. Under current law, homeowners who are unable to meet their mortgage payments can face an unexpected tax bill. … I believe we need to change the code to make it easier for people to refinance their homes and stay in their homes. … I’ve called Senator Debbie Stabenow of Michigan and told her that she’s on to a good idea with the bill that she…submitted to the Senate. … With a few changes in the Senate version and the House version, this administration can support [the] bill.

Above, when Bush refers to U.S. Senator Stabenow’s bill, he’s talking about the Mortgage Relief Act. The Mortgage Relief Act, introduced in May of this year by Senator Stabenow, would change current law that forces individuals to pay an income tax when they have had a part of their mortgage loan forgiven or have been forced to foreclose because of their inability to pay their mortgage.

Finally, Bush had this to say about the nation’s extremely high rate of foreclosures:

My administration will launch a new foreclosure avoidance initiative to help struggling homeowners find a way to refinance. Secretary Jackson and Secretary Paulson are going to reach out to a wide variety of groups that offer foreclosure counseling and refinancing for American homeowners. These groups include community organizations like NeighborWorks and mortgage lenders and loan services, and the FHA, as well as government-sponsored enterprises like Fannie Mae and Freddie Mac. These organizations exist to help people refinance, and we expect them to do that.

The Bush administration is hopeful that the aforementioned steps will deliver help and hope to American families who need it. “We’ll help guard against future problems in the housing sector, President Bush said. “We’ll reaffirm the vital place of homeownership in our nation. When more families own their own homes, neighborhoods are more vibrant and communities are stronger, and more people have a stake in the future of this country.”

Posted By: Ralph Roberts @ 2:51 pm | | Comments (15) | Trackback |
Filed under: Foreclosure,Legislation,Mortgage Fraud,Real Estate Fraud,Subprime Mortgages

June 20, 2007

State of Florida Gets Tough on Mortgage Fraud

Last July, a survey found that only one percent (1%) of Florida’s homeowners indicated that becoming the victim of a real estate scam was their biggest concern. Thank goodness then that the Florida State Legislature did not set its 2007 legislative priorities according to what homeowners feared most. Yesterday, Florida’s governor signed into law legislation ensuring that all Floridians who participate in the American dream of home ownership receive more consumer protections, especially with regard to Real Estate and Mortgage Fraud.

The new law, which goes into effect later this year, creates a comprehensive consumer protection package relating to mortgages, and makes mortgage fraud a third-degree felony in the state of Florida. Bill provisions also provide that mortgage brokers and lenders supply to borrowers detailed disclosures for various loan products, and that in every mortgage loan transaction, mortgage brokers and lenders notify a borrower of any material changes in the terms of a mortgage loan that was previously offered to a borrower within three (3) business days after being made aware of such changes by the lender, but not less than three (3) business days before signing the settlement or closing statement.

SB 1824 also authorizes Florida’s Office of Financial Regulation to take enforcement action against any mortgage brokers or lenders who violate the federal Real Estate Settlement Procedures Act or the federal Truth-in-Lending Act.

Posted By: Ralph Roberts @ 12:15 am | | Comments (3) | Trackback |
Filed under: Florida,Legislation,Mortgage Fraud,Real Estate Fraud

June 13, 2007

Mortgage Fraud Legislation Proposed in Massachusetts

As a part of a comprehensive plan to prevent predatory lending and protect families facing foreclosures, the Governor of Massachusetts has filed legislation to criminalize mortgage fraud. Governor Deval Patrick’s bill follows several regulatory changes already put in place to address the rising tide of foreclosures in Massachusetts. In April, the state established a hotline for consumers and began assisting homeowners in crisis.

The proposed legislation, “An Act Implementing the Division of Banks Mortgage Summit Recommendations,” implements recommendations from the the state’s Mortgage Summit Working Group (convened in response to rising foreclosure rates). The Working Group included nearly 50 participants from government agencies, non-profit organizations, and the mortgage lending industries who convened to develop a comprehensive foreclosure prevention strategy.

The bill as proposed includes the following provisions:

  • Criminalizing mortgage fraud. In response to rising instances of mortgage fraud, the bill defines mortgage fraud in statute and create criminal penalties for violations.
  • Prohibiting abusive foreclosure rescue schemes. With many people facing the threat of foreclosures, unscrupulous individuals and groups have preyed upon consumers’ fears of losing their homes by promising to allow homeowners to stay in their home in exchange for signing over the property. Many people who fall victim to this scheme think that they are making mortgage payments when in fact they are paying rent. This bill would prohibit such agreements unless the purchaser is a direct relative.
  • Requiring a Notice of Intent to Foreclose and Right to Cure. The bill sets out a right to cure for a consumer that is in default and requires the holder of a mortgage to inform the consumer of this right in addition to the intent to foreclose if the consumer does not cure the default.
  • Prohibiting a lender from making an adjustable rate subprime loan unless the borrower opts-out. In reviewing default rates and foreclosure information, subprime fixed rate loans have performed well and allowed consumers with impaired credit to reestablish their credit history. Subprime adjustable rate mortgages (ARMs), on the other hand, have very high default rates and higher foreclosure rates. The Massachusetts bill would prohibit any lender from making a subprime ARM unless the consumer affirmatively opts-out of the fixed rate product and presents a certificate indicating that they have received homebuyer counseling.
  • Establishing a central repository of foreclosure information at the Massachusetts Division of Banks. The bill would require lenders and servicers to send a copy of the Notice of Intent to Foreclose and Right to Cure to the Division of Banks as well as the details of any final foreclosure. In addition, the bill requires the Division of banks to establish a database of foreclosure information to track geographic and industry trends relative to foreclosures.

Since April, when Governor Patrick first instructed the Division of Banks to seek case-by-case foreclosure delays for homeowners who filed complaints, more than 400 people have reached out to the Division. Just under half of those individuals were already in foreclosure and needed immediate relief. The Division was able to secure 30- to 60-day stays in the foreclosure process in most of those cases. Due to these stays, many individuals and families were able to refinance or are in the process of refinancing their loans, were able to modify their loan terms, have received credit counseling, or were able to sell their homes. In addition, homeowners who contacted the Division and were in financial distress but not yet in foreclosure were partnered with counseling agencies that offer comprehensive services that can help them change direction and hopefully prevent foreclosure from occurring.

In addition, Massachusetts’ Division of Banks is also continuing work on the other Working Group recommendations. These include implementing regulatory changes that increase licensing and education requirements for mortgage lenders and brokers to eliminate disreputable firms and practices, and building on the partnerships between government, non-profit organizations, and the mortgage industry to improve the support for homeowners and monitoring of the industry.

Posted By: Ralph Roberts @ 12:01 am | | Comments (3) | Trackback |
Filed under: Legislation,Massachusetts,Mortgage Fraud,Real Estate Fraud

January 23, 2007

Arizona State Senator Proposes Mortgage Fraud Legislation

On the heels of The Arizona Republic’s ground-breaking article on cash back at closing schemes, an Arizona State Senator is attempting to revise a state statute to make it a crime to misrepresent financial information when attempting to purchase a home or obtain a home mortgage. AZ State Senator Jay Tibshraeny (R, 21st Dist.) yesterday introduced Senate Bill 1221, which states:

A. A person commits residential mortgage fraud if, with the intent to defraud, the person does any of the following:

  1. Knowingly makes any deliberate misstatement, misrepresentation or omission during the mortgage lending process that is relied on by a mortgage lender, borrower or other party to the mortgage lending process.
  2. Knowingly uses or facilitates the use of any deliberate misstatement, misrepresentation or omission during the mortgage lending process that is relied on by a mortgage lender, borrower or other party to the mortgage lending process.
  3. Receives any proceeds or other monies in connection with a residential mortgage that the person knows resulted from a violation of paragraph 1 or 2 of this subsection.
  4. Files or causes to be filed with the office of the county recorder of any county of this state any residential mortgage loan document that the person knows to contain a deliberate misstatement, misrepresentation or omission.

B. An offense involving residential mortgage fraud shall not be based solely on information that is lawfully disclosed under federal disclosure laws, regulations and interpretations related to the mortgage lending process.

C. A person who violates this section is guilty of a class 4 felony, except that a person who engages or participates in a pattern of residential mortgage fraud or who conspires to engage or participate in a pattern of residential mortgage fraud is guilty of a class 2 felony.

D. For the purposes of this section:

  1. “Mortgage lending process” means the process through which a person seeks or obtains a residential mortgage loan including solicitation, application, origination, negotiation of terms, third-party provider services, underwriting, signing, closing and funding of the loan.
  2. “Pattern of residential mortgage fraud” means one or more misstatements, misrepresentations or omissions that are made during the mortgage lending process, that involve two or more residential properties and that have the same or similar intents, results, accomplices, victims or methods of commission or are otherwise interrelated by distinguishing characteristics.
  3. “Residential mortgage loan” means a loan or agreement to extend credit to a person that is secured by a deed to secure debt, security deed, mortgage, security interest, deed of trust or other document representing a security interest or lien on any interest in one-to-four family residential property and includes the renewal or refinancing of any loan.

So, what does all of this mean? According to the Arizona Daily Star:

Just a single offense could result in a 2 1/2 year prison term. And those who are involved in multiple schemes potentially face five years behind bars.

Felecia Rotellini, superintendent of the state Department of Financial Institutions, acknowledged there already are both criminal and civil laws designed to go after those who commit fraud. And she said her agency already has managed to convict people involved in such schemes. But Rotellini said SB 1221 likely would make prosecutions easier. Potentially more significant, Rotellini said this law spells out that homebuyers involved in these kinds of frauds are equally culpable — and can be equally punished. “It will help to cover the gamut of players,” she said.

Rotellini goes on to tell the Daily Star that while her agency has broad powers over both mortgage bankers and mortgage brokers, she has no authority over home buyers, who in many cases may be the primary perpetrators of real estate fraud:

“In fact the buyer in these cash-back schemes is the primary perpetrator,” Rotellini said. “They’re the one that’s getting the loan that’s been misrepresenting the value of the property or other aspects of it.” If nothing else, Rotellini said she believes having a specific law on the books making mortgage fraud a crime will act as a deterrent. “Maybe that’s wishful thinking,” she said. But Rotellini said a new statute — and the stiff penalties — might convince would-be schemers to reconsider.

Posted By: Ralph Roberts @ 12:41 am | | Comments (0) | Trackback |
Filed under: Arizona,Legislation,Mortgage Fraud

January 9, 2007

Colorado’s Attorney General Proposes Legislation to Curb Mortgage and Foreclosure Fraud

In an ongoing effort to curb mortgage and foreclosure fraud in his state, Colorado’s Attorney General announced yesterday a legislative proposal that targets appraisal fraud and mortgage brokers who engage in deceptive trade practices.

Last year, thanks to the efforts of a state-appointed Mortgage Fraud Task Force, new consumer protections were adopted for Colorado families facing foreclosure and stiffer penalties were enacted to address mortgage fraud. This year, Colorado’s AG is interested in taking further steps to protect homeowners. The legislation he announced yesterday targets the growing problem of appraisal fraud, and adds additional penalties against mortgage brokers who engage in unfair practices.

Under the proposed legislation:

  • Colorado’s Division of Real Estate will have the authority to deny or revoke the registration of a mortgage broker who has been prohibited by any court from engaging in deceptive conduct relating to brokering a mortgage loan.
  • To address the growing wave of appraisal fraud, the legislation will also prohibit a mortgage broker from compensating, coercing, or intimidating a real estate appraiser in order to obtain an artificially inflated appraisal.
  • Finally, the legislation will prohibit anyone else, including realtors, other brokers, lenders, or investors from improperly influencing, or attempting to influence an appraiser and the value of a residence, and prohibits an appraiser from knowingly submitting a false appraisal.
  • Violators will be subject to criminal prosecution as a Class One misdemeanor upon a first conviction and a class 6 felony upon a second or subsequent conviction. They will also be subject to civil liability under the state’s Consumer Protection Act.

In July 2005, Colorado’s AG formed a Mortgage and Foreclosure Fraud Task Force. The Task Force’s recommendations subsequently led to new laws requiring that all transactions between homeowners and foreclosure consultants or equity purchasers be in writing, and which prohibits consultants who provide advice or assistance from acquiring any interest in a homeowner’s property, and calls for a three-day cooling off period.

Posted By: Ralph Roberts @ 2:01 am | | Comments (4) | Trackback |
Filed under: Colorado,Foreclosure Fraud,Legislation,Mortgage Fraud

November 14, 2006

Congressional Agenda Should Address Mortgage Fraud and Predatory Lending

The recent Democratic takeover of Congress might place mortgage fraud and predatory lending near the top of the agenda for several Congressional committees, according to the Appraisal Institute. In the House of Representatives, the Financial Services Committee is set to be chaired by Rep. Barney Frank, D-Mass., a veteran of banking and real estate-related issues, says the Appraisal Institute’s Bill Garber. Frank has expressed concerns about predatory lending and mortgage fraud, both of which were heavily discussed and debated in the 109th Congress in the Financial Services Committee, but not resolved.

The second-ranking Democrat on the committee is Rep. Paul Kanjorski, D-Penn., prime sponsor of The Responsible Lending Act, H.R. 1295, which the Appraisal Institute has supported because it advances ideas to improve the way in which real estate appraisers are regulated at the federal and state levels. Rep. Kanjorski’s district has been besieged by mortgage fraud in recent years, some of which has involved appraisals.

In the Senate, the Senate Banking Committee is slated to be chaired by Sen. Christopher Dodd, D-Conn., who co-wrote Title XI of the Financial Institutions Reform, Recovery and Enforcement Act, which set forth state licensing and certification requirements for appraisers in 1989. According to Garber, Sen. Dodd is expected to address key credit card reform issues early in the 110th Congress, but like the House, the issues of predatory lending and mortgage fraud are likely to be elevated in the committee’s priorities. In addition, Sen. Jack Reed, D-RI, who is likely to chair the Senate Subcommittee on Housing and Transportation, is expected to be a key leader on appraisal issues. An attorney by trade, Sen. Reed has a long been a champion of homeownership issues and has a great deal of familiarity with real estate appraisal legislation, having been involved in a Title XI oversight hearing in 2004.

Another legislator likely to weigh in on this issue is Senator Barack Obama, D-Ill., who this past February introduced legislation to combat mortgage fraud and provide state appraisal regulators resources to conduct oversight over appraisers.

Posted By: Ralph Roberts @ 12:52 am | | Comments (2) | Trackback |
Filed under: Legislation,Mortgage Fraud,Real Estate Fraud,Stop Fraud Act
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