Federal E-alert. Mortgage Broker's take note!

chow

FEDERAL MORTGAGE e-ALERT©
(March 20, 2006)

FEDERAL TRADE COMMISSIONS FILES BRIEF IN LAWSUIT TO URGE COURT THAT MORTGAGE BROKERS MUST PROVIDE ADVERSE ACTION NOTICES TO CONSUMERS UNDER THE FAIR CREDIT REPORTING ACT

FACTS

The Commission has approved the filing of an amicus brief in the currently pending case Whitfield et al v. Radian Guaranty, Inc., No. 05-5017 (3d Cir.). The brief addresses a lower court ruling that held that a mortgage company was not required to provide a consumer with a Fair Credit Reporting Act (FCRA) adverse action notice even though, as a result of the information in a consumer report, the company had charged a higher mortgage insurance premium, and that premium was paid by the consumer. The district court based its holding on the fact that the lender, not the consumer, obtained the policy and was the policy’s beneficiary.
FTC urges the Third Circuit to overturn the lower court’s decision, stating that it erred by ignoring the adverse action notice requirement imposed by Section 615 of the FCRA on users of consumer reports. The brief argues that setting a higher initial rate for a mortgage constitutes “adverse action,” as that term is defined in the FCRA. The brief then points out that Section 615 of the FCRA requires a user to provide a consumer with an adverse action notice whenever that user takes adverse action “with respect to” that consumer. Even though the consumer was not the policy's beneficiary, Radian’s action was “with respect to” the consumer because the consumer was required to pay the higher insurance premium..
MORAL
I agree with the lower court. The broker is not the lender and therefore not the creditor as that term is defined in federal regulations. But I will probably lose the bet. SO, if you increase the interest rate or fees because of credit, then give the adverse action notice or you to may be sued.
ARIZONA FAMILY THAT COMMITS MORTGAGE FRAUD TOGETHER GETS FELONY CONVICTIONS TOGETHER

FACTS
Leonel Estrella and his sister Maria Carmen Garcia were each sentenced by U.S. District Judge James Teilborg to five years probation and are required to pay restitution of $117,564. Both defendants pleaded guilty to a charge of fraudulently obtaining Federal Housing Administration mortgage insurance.
Mr. Estrella, a licensed Arizona real estate agent, and Ms. Garcia, a loan officer, admitted that they conspired to submit false statements to HUD while employed at various realty and mortgage companies in the Phoenix metropolitan area. The pair submitted falsified employment and income documents and Social Security number information as well as credit reports to HUD to qualify their mutual clients for FHA-insured home loans.
Mr. Estrella was convicted of knowingly executing a scheme to defraud Washington Mutual Bank by preparing false wage documents. The false documents were submitted to the bank in order to obtain conventional home loans for his clients. A total of 14 FHA-insured home loans with insured mortgages totaling $1.58 million and 14 conventional home loans with mortgages totaling $1.74 million were involved. Five of the FHA loans foreclosed, with a loss to HUD of $140,310.
From the fraud, Mr. Estrella obtained more than $96,000 in real estate commissions and Ms. Garcia received more than $34,000 in fees. Restitution was ordered to cover the government's and the lending company's losses from the defaulted fraudulent loans that were foreclosed upon during 2003. (on31306)
MORAL
Let me see? They made $130,000 in income. Probably paid there lawyers at least $100,000 to keep them out of prison. That means they each made $15,000 to obtain a federal felony conviction, lose the right to vote, unable to obtain security clearances, relegated to low paying jobs because of the conviction. Seems reasonable to me!!!!
CALIFORNIA CORPORATION LIABLE FOR UNPAID WAGES NOT INDIVIDUAL OFFICERS EXCEPT UNDER LIMITED CIRCUMSTANCES
FACTS
William Gregory was sued by the California Department of Labor Standards Enforcement. The trial court held him individually liable for his corporation’s delinquencies in not paying the outstanding wages and expenses and charged him with the interest and penalties as set forth in the Labor Code. The liability was determined on the basis of his being a corporate officer who had operational control of the corporation’s covered enterprise.
Gregory was the creative force behind his corporation for over 20-years. He hired, he fired and he controlled whatever the corporation did or did not do. He was registered with the Secretary of State as the Chief Executive Officer. Judgment at trial was against Gregory and the corporation for over $100,000. Gregory appealed.

The 4th Appellate District said . . .

Reversed. There is no personal liability for nonpayment of wages of corporate employees. The Fair Labor Standards Act (FLSA) defines “employer” broadly holding a corporation’s president liable for his employees’ unpaid overtime wages, numerous federal circuits have concluded that an individual corporate officer or owner may be deemed an employer under the FLSA — and therefore responsible for the corporation’s FLSA obligations — in situations where the individual has overall operational control of the corporation, possesses an ownership interest in it, controls significant functions of the business, or determines the employees’ salaries and makes hiring decisions.” (Lopez, vs. Silverman, (1998) 14 F.Supp.2d 405, 412; 29 USC §203(d)).

HOWEVER, the California Labor Code supplies no uniform definition, broad or narrow, for “employer.” While the FLSA contains an express definition of ‘employer.’ Labor Code section 1194 ( the code section that allows this type of lawsuit does not. In this circumstance, a statute referring to employees without defining the term has allowed courts to apply the common law test of employment. Under the common law, corporate agents acting within the scope of their agency are not personally liable for the corporate employer’s failure to pay its employees’ wages. (Jones v. Gregory, No G030347 (Cal. 4th App. Dist. March 14, 2006)

MORAL

Why spell out this much detail? Because under certain circumstances such as Labor Code Section 558, people acting on behalf of the corporate employer may be liable personally for penalties in “an amount sufficient to recover underpaid wages,” which shall be “paid to the affected employee.” Moreover, section 558 applies to “[a]ny employer or other person acting on behalf of an employer,” a much stronger indication it applies to corporate officers and agents. Section 558, subdivision (a), provides: “Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission shall be subject to a civil penalty. Further still, other states, such as Nevada, do follow the FLSA definitions. Thus if you are a corporate employer in Nevada, the President, etc. could be personally liable for unpaid wages.

CALIFORNIANS CAN NOW CHECK ALL LICENSES AT THE SAME TIME
FACTS
By going to http://www.dre.ca.gov/licinfo.htm , you can input the name of the person or corporation or LLC, and check to see if the y are licensed by DRE, DFI, OREA, or DOC with one click thus avoiding the necessity of going to DRE first for that license, then going to DOC to check for CFL or RMLA and then to DFI for savings and loan, thrifts, etc and then to OREA to check for the appraisal licenses. This was compliments of Department of Real Estate Commissioner Jeff Davi at his luncheon speech before the Silicon Valley Chapter of the California Association of Mortgage Brokers on Thursday, March 16, 2006.
MORAL
Isn’t technology wonderful? Now you can be caught that much faster if you are being naughty. SO be nice.
TWO ROSEVILLE, CALIFORNIA MORTGAGE BROKERS ARRESTED FOR REAL ESTATE FRAUD-YOU ARE URGED TO CHECK YOUR DOCUMENTS
FACTS
John Wilfred Curley, 37, owner of JC Lending at 4030 Truxel Road, and Muhammad Adenwala, 30, owner of Mountain View Mortgage in Roseville, were arrested March 3, 2006 on suspicion of recording false documents, forgery, grand theft and conspiracy. The incident came to light in August during a property settlement between a husband and wife. The husband filed loan papers with Curley in July, in hopes of paying his wife her portion of the property. About a month later, the man and woman met to close the transaction, but title company officials informed them the loan had already been approved and the deed signed. The couple discovered their signatures had been forged.

Adenwala allegedly notarized the forged deed and recorded it with the county and a broker fee had been paid to JC Lending for the forged note. Police urge anyone who has conducted business with either man to double-check documents for accuracy. Anyone with information is asked to call Crime Alert at (916) 443-HELP. (sacrobee3-9-06)

MORAL
Did you “double broker” or fund any loans for JC Lending or Mountain View Mortgage? Better check now for potential liability.
MADERA COUNTY, CALIFORNIA DISTRICT ATTORNEY ISSUES ARREST WARRANT FOR WOMAN CHARGING FEES TO POTENTIAL MORTGAGE LOAN BORROWERS
FACTS
The Madera County DA has filed charges and filed for an arrest warrent against a Milpitas (CA) woman, Angeline Lizarrago.

Lizarrago has allegedly been charging people fees to arrange mortgages which were never obtained. The victims, as many as 20 so far, all appearded to be people who would not normally qualify for the mortgages and they had paid fees ranging from $500 to $42,000. Lizarrago operated a company called Delta Bay Funding which also had an office in Santa Clara County. (fresobee31706)

FACTS

Has anyone funded loans from Delta Bay Funding? Has anyone charged borrowers up from feets before obtaining the loan? See your lawyer now, you may see jail later.
COLORADO FEDERAL JUDGE SENDS GERALD P. SMALL, III TO PRISON FOR OVER EIGHT YEARS AND ORDERS $37 MILLION IN RESTITUTION
FACTS
GERALD P. SMALL, III , age 43, of Broomfield, Colorado, sentenced by Chief U.S. District Court Judge Lewis T. Babcock to serve 101 months in federal prison. SMALL will also have to pay over $37,000,000 in restitution. The court deferred entry of judgement and restitution for 10 days so that disputed issues in the related forfeiture proceeding may be resolved. Chief Judge Babcock ordered SMALL to surrender to a facility to be later designated by the Bureau of Prisons.
SMALL was arrested on a Criminal Complaint on March 12, 2004. On April 6, 2004, a grand jury in Denver indicted SMALL and five others for implementing a scheme to obtain hundreds of millions of dollars in bogus mortgages and multi-million dollar lines of credit by falsifying documents submitted through SMALL’s company, Amerifunding, located in Westminster, and another Denver company controlled by SMALL, 20th Century Mortgage, Inc.
According to the the plea agreement, SMALL and his associates at Amerifunding used help-wanted advertisements published in a Denver newspaper to solicit job applicants, promising salaries of more than $100,000, for the sole purpose of obtaining the applicants’ personal identification information to obtain the fraudulent mortgage loans.
Others previously charged and convicted in the same indictment as GERALD SMALL were: KELLI SMALL, who was sentenced to serve 160 hours of community service during her 5 years probation; ROBERT BICHON, who was sentenced to serve 35 months in federal prison, and ordered to pay restitution in the amount of $2,295,155.97 to various victims, and $141,163.13 to Washington Mutual; ROBERT SIGG, who was sentenced to time served, and was ordered to pay restitution in the amount of $141,163.13 to Washington Mutual joint; CHARLES WINNETT, who was ordered to serve 51 months in federal prison and ordered to pay restitution totaling $22,400,000 to Flag Star Bank, and $12,632,080.64 to Impac Warehouse Lending Group; and CHAD HEINRICH, who was ordered to serve 28 months in federal prison, and ordered to pay restitution totaling $22,400,000 to Flag Star Bank, and $12,632,080.64 to Impac Warehouse Lending Group.
On February 7, 2006, HARRY LOU GAYLE, age 50, of Highlands Ranch, Colorado, an employee of GERALD SMALL, was charged by Criminal Information with one count of filing a false tax return for 2002. According to the Information, GAYLE received $44,000 for signing four false loan applications related to a real estate fraud, but did not report the proceeds on his tax return. GAYLE pled guilty on March 1, 2006 before U.S. District Court Judge Marcia S. Krieger, and is to be sentenced June 26, 2006.
During the investigation, assets obtained by SMALL and his associates were seized or restrained. These assets included 15 homes in Nevada and Colorado, a 2004 Jaguar, a 2003 Lexus, and over $8,000,000 in cash or bank accounts. (3/2/0 usattycolorado)
MORAL
I told you previously the federal government would start seazing forfeiture assets. They are now doing it. Commit fraud, lose your assets. There is a way to reduce the damage and not go to prison and not lose your assets BUT only if you act before there is a known investigation. If you have committed mortgage fraud, and your lawyer is knowledgeable in this area see him/her now. There are ways to reduce the probability of going to prison dramatically and legally. Good Luck.
IDAHO NEW LICENSING LAW IN EFFECT AS OF JANUARY 1, 2006
FACTS
To regiser the cost is $200 plus a surety bond in the amount of $10,000. License to be renewed every October 31.. Currently there are 1,1 mortgage broker/oenders in Idaho. Loan originators must be independently licensed to mortgage broker (commrrel1-2006)
MORAL
Nice low number depending on the size of the ownership population.

NEVADA MARK YOUNG SENTENCED TO SIX YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
MARK YOUNG, age 41, of Las Vegas, Nevada, former owner of Nevada First Residential Mortgage sentenced on March 10, 2006 to over six years in federal prison for making false statements to HUD in order to obtain hundreds of mortgage loans for unqualified borrowers. He is also required to serve three years of supervised release and must pay $457,740 in restitution. He was convicted in September 2005 of conspiracy to make false statements and 32 separate counts of making false statements.
From about May 2000 through June 2002, Young owned and operated Nevada First Residential Mortgage in Las Vegas. Young conspired with his own employees and employees of General Realty to create false mortgage loan packets for low-income borrowers (most of them illegal aliens) to enable them to obtain mortgages and purchase homes beyond their means. The packets had false pa stubs, w-2 forms, verification of employment, income, assets, immigration status, credit references, gift letters, and other false information. Young submitted 233 loan applications for HUD-insured loans. Of these, 58 loans defaulted and the Government paid out about $1.9 million in claims under the FHA insurance.
General Realty real estate agent Leo Werner also pleaded guilty to Conspiracy and was sentenced to 10 months in prison. Six others also pleaded guilty to a misdemeanor charge of making false statements to HUD and have been sentenced.
MARK YOUNG is released on a personal recognizance bond and was permitted to self-surrender to the Federal Bureau of Prisons no later than May 8, 2006. (USATTYNEV31306)
MORAL
Note that the federal prosecutor investigated loans over three years old before indicting. The government can go back 10-years. Thus any loans from 1996 to the present that are fraud can still be prosecuted. Bring any loans to mind? If so, see your attorney now, or possibly see prison later.
SEMINARS

APRIL 21, 2006 – 9-12

How to Survive an MLD Audit without losing your license.

Location: Old Republic Title, 140 N. Stephanie, Henderson, Nevada

Registration:Dennis Wentworth- (702) 283-3717; Dennis@DennisWentworthTrainingSeminars.com

1-4:30 - TILA-RESPA Updates. Updated laws, regulations and cases from 2005 to February 2006 including how to do high-rate high fee loan without violating Section 32 of Reg;, what is and is not a kickback; how to legally give someone a fee in a cooperative brokerage without violating RESPA and cases where brokers, loan officers and real estate salespeople have been disciplined and fined by RESPA Police for accepting kickbacks.

Location: Old Republic Title, 140 N. Stephanie, Henderson, Nevada

Registration:Dennis Wentworth-(702)283-3717; Dennis@DennisWentworthTrainingSeminars.com

The two seminars are accredited in Nevada for renewing your MLD license. They may or may not be accredited for other state licensing renewals. Please check with the agency that issues your license.

MAY 16, 2006 - 5:30 p.m.- 8:30 p.m.

Employee Labor Laws and Regulations affecting mortgage Brokers and Bankers. The necessity to pay overtime to employees, underwriters, loan officers, processors and others. A syllabus will be given to all attendees.

Tony's Seal Landing, 13612 Newport Ave., Tustin CA –Dinner Meeting

TOPIC

Labor laws and regulations affecting mortgage brokers and bankers and the necessity to pay overtime to employee underwriters, loan officers, processors and others. A syllabus will be given to each of the attendees.

Call Loretta Lee to Register at 714-662-4990. Checks payable to Association of Professional Mortgage Women. Registration cost is $45 including manual.

THE INFORMATION HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

If you want to make certain you receive our e-mails you must put our e mail address in your address book. Otherwise, AOL among other servers may reject the message and you will not receive the information.

Herman Thordsen

IF YOU HAVE TROUBLE WITH:

• MORTGAGE FRAUD
• NEVADA MORTGAGE LENDING DIVISION AUDITS
• HUD AUDITS AND THE MORTGAGEE REVIEW BOARD;
• LICENSING IN THE VARIOUS STATES
• DEPARTMENT OF REAL ESTATE AUDITS OR LICENSE DISCIPLINARY MATTERS
• DEPARTMENT OF CORPORATIONS AUDITS OVER CFL OR RMLA LICENSES;
• MINIMUM WAGE OR OVERTIME LAWS

Please contact Herman Thordsen toll free (888) 667- 8529.
Go to www.lendinglaw.com and upcoming events for further details.

Herman Thordsen and his firm are the attorneys for numerous mortgage brokers and lenders, both in California and nationally as well as the attorneys for trade associations including Central Coast Chapter-- (CAMB), Central Valley Chapter-- (CAMB), Inland Empire Chapter-- (CAMB), North Bay Chapter-- (CAMB), North San Diego Chapter—(CAMB), San Diego Chapter --(CAMB), Silicon Valley Chapter-- (CAMB). He is a member of the Advisory Board of the Mortgage Banking and Real Estate Appraisal Programs at California State University, Fullerton.

In the past, the firm has represented the Nevada Association of Mortgage Brokers. Mr. Thordsen has been a member of the California Department of Real Estate Solicitation Task Force Committee, the California Department of Motor Vehicles Anti-Fraud Task Force.

Mr. Thordsen is a syndicated columnist for Broker Universe, a division of Thomson Media as well as publishing monthly columns for the San Diego Chapter-CAMB and is a responding attorney for RESPANEWS.com. He conducts seminars on Federal and State mortgage loan compliance issues that cover HUD, RESPA, TILA, PREDATOREY LENDING, NEVADA and CALIFORNIA.. He authors numerous manuals and articles on HUD Audits, California Department of Real Estate Audits, Nevada Mortgage Lending Division Audits, Truth in Lending, RESPA, Mortgage Fraud and Predatory Lending. His most recent publication is on loan officer minimum wage and overtime laws.

Mr. Thordsen is an invited guest speaker before trade groups, and has been a guest speaker on HUD audits before the Clark County Bar Association, Las Vegas Nevada and the Nevada Association of Mortgage Brokers Education Committee. He has been a guest speaker along with the FBI as invited guests on mortgage fraud issues as well as California Department of Real Estate and Nevada Mortgage Lending Division audits.

The firm regularly represents brokers and lenders before licensing agencies including the HUD-FHA Mortgagee Review Board (MRB), HUD Home Ownership Centers, California Office of Administrative Hearings, and the Nevada Mortgage Lending Division. This representation includes those charged with violation of federal and state mortgage laws or the withdrawal of FHA/HUD approval and the threat of paying civil penalties to HUD.

The firm represents those accused of civil and criminal Mortgage Fraud and other white-collar crimes such as wire fraud and mail fraud in federal court actions filed by the Office of the United States Attorney and others.

We represent our clients in employee labor disputes before various labor boards including minimum wage, overtime and unemployment compensation issues.

The firm’s attorneys are successful in recovering damages for clients in personal injury lawsuits.

If we may be of service in these areas of personal injury, probate, or estate planning and asset protection, please contact us, and an attorney will discuss the matter with you.