Communiversity Magazine
Additional Lending Law &
Mortgage
Fraud Information
WEBSITES AND LINKS
● SUBPRIME MORTGAGES STATE BY STATE (United States map
showing where the subprime fallout will be worst)
● THE
MORTGAGE LENDER IMPLODE-O-METER (controversial site tracking lenders as
they go out of business)
● ZILLOW
(providing a ball park estimate of property values)
● FEDERAL MORTGAGE LAW: UNDERSTANDING THE TRUTH IN LENDING ACT
- CONTINUING EDUCATION FOR ILLINOIS MORTGAGE
PROFESSIONALS (a 43 page PDF file used for a course on
the TILA)
● TRUTH IN LENDING ACT AND REGULATION Z - RIGHT OF RESCISSION
2007 ARCHIVE (a questions and answers page from complianceheadquarters
Due to
escalating prices, California has always been in the top 10 states for mortgage
fraud
FBI Investigates
Mortgage Fraud
http://www.itsbadbusiness.com/ 2008/ 01/ fbi_investigates_mortgage_frau.html
Although they won’t name the firms involved, the FBI has begun
investigations into fourteen sub-prime mortgage lenders. The number
of fraud complaints fielded by the FBI have grown from 3,000 in 2003 to
48,000 on 2007. Neil Power, chief of the FBI economic crimes unit, said that
the increase is due "to good old-fashioned greed." They are zeroing
in on cases involving insider trading with changes in property values and on
accounting fraud, where they are looking at “housing developers who may have
reported cash reserve accounts to reflect falsely inflated values." The number of cases are impressive when you realize that the FBI
only investigates cases over $500,000 and most of the investigations involve
cases over $1 million.
The FBI considers mortgage fraud one of the fastest growing
financial crimes in the country, labeling it "pervasive" in a May
report. But the structure of the mortgage industry, where initial loans were
cut into pieces for sale on the secondary market, means the problem could be
much bigger than the complaints the agency is receiving, according to the
report. That structure allowed mortgage lenders to isolate themselves from the
devastating effects of loans made to borrowers who couldn't pay them back.
Eighty percent of the mortgage fraud nationwide is attributable to collusion
between real estate industry insiders, and borrowers who misrepresent their own
incomes or identities constitute the other 20 percent, according to one FBI
report.
One typical type of mortgage
fraud is actually perpetuated against lending institutions in San Diego County,
is called; "cash back at
closing," an example of the scheme looks like this: A house has been
listed on the market for several months at $500,000. Then, without fanfare, the
listing agent raises the price to $625,000, and hires an appraiser to say the
house is worth the new, higher amount. Based on that appraisal, a lender
approves a loan for $620,000.
Soon, the buyer
purchases the house for $620,000, using a mortgage for 100 percent of that
amount. The sellers get their full price, the buyer gets close to $100,000
cash, and the agents for the buyer and seller garner a higher commission than
they would have on the original list price.
"That's where it gets tempting and awkward for the seller," said San
Diego mortgage fraud expert Todd Lackner. "They're getting their full
price; it's the seller's dilemma."
The "cash back at closing," scam will typically defraud the
lender, and artificially inflate values in entire neighborhoods, leaving the economy reeling from the effects of so
many foreclosures.
The FBI says suspicious activity reports for mortgage fraud increased more than
six-fold between 2002 and 2006 nationwide, as skyrocketing housing values in
many cities like San Diego attracted investors seeking quick profits.
But it's the fallout from the cash-back deals that's actually the worst problem locally. In
most of these situations, the buyer leaves after making maybe three mortgage
payments, sending the home into foreclosure and keeping the cash. They then
allow the home to lapse into foreclosure; and the cash gained from the
kick-back scheme pales in comparison to the ruined credit. In the meantime, the
neighborhood value has been artificially inflated, raising property taxes.
Neighbors who were once happy to see a comparable house selling for so much
find themselves now next to an abandoned eyesore that will likely be auctioned
at a loss. Now the lenders are also faced with huge losses.
All of the scheme's
steps, save the deposit of the cash into the buyer's bank account, are usually
traceable in the Multiple Listing Service, the buying and selling database used
by real estate professionals. That allows people like Lackner, a longtime local
real estate appraiser and self-taught mortgage fraud expert, a window into what
he says are hundreds of similar cases that have exploded in San Diego county in the last couple of years.
A few years ago, lenders would often OK a small
amount of cash back, typically no more than 3 percent of the sale price, to
help pay closing costs or to complete repairs, Lackner said. On a $500,000
house, that'd be about $15,000. But cash-back schemes have grown and twisted.
Often, buyers seeking cash back were buying several properties at once,
financing them all with 100 percent loans from different lenders, claiming each
property is "owner-occupied" in order to get the loan with no down
payment.
Many of the lenders that allowed the price to be adjusted have gone out of
business. In fact, Lackner has observed that the implosion in recent months of
dozens of mortgage lenders that specialized in the zero-down, no income
verification loans used widely in these cases has begun to dry up the
occurrences of many deals that look like fraud.
Tom Pool with the state
Department of Real Estate said the number of complaints against licensed agents
or brokers for particular transactions -- the category under which mortgage
fraud complaints would fall -- is growing. And, he said, wherever the DRE
investigates and suspends or revokes licenses, law enforcement officers are
often close behind.
"The feds have been on the heels of a number of accusations that we’ve
filed," Pool said, referring to some cases in Northern California and
Bakersfield.
For Lackner, the calls come from everyone ranging from real estate
professionals to neighbors suspicious of the deal down the street. He writes
software to search the MLS and the tax rolls for suspicious activities. He
shows files to governments and public agencies. And he hopes that one day, the
schemes will be busted open and the market will heal.
"It's my goal to
get every one of these people busted," he said. "I just don't know
how they sleep at night."
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By Donna Leinwand,
USA TODAY In
the three months since Iowa Attorney General Tom Miller launched a
foreclosure hotline, nearly 6,000 Iowans have called for help. The calls
come to the Iowa Mediation Service, which Miller hopes will be able to
negotiate with lenders to help borrowers keep their homes. "We're trying
to do it on a mass basis," Miller says. FBI:
Housing
scam convictions more than double in 2007 Foreclosure
rates for homes purchased using non-standard, high-interest
loans have reached historic highs in Iowa and around the USA. States
and communities, confronting unoccupied homes and decreasing property values,
are trying to curb abusive lending practices before they snare would-be home
buyers and rescue homeowners already caught in the crisis. FIND MORE STORIES IN: Connecticut
| New
Mexico | Housing
| Wells
Fargo Bank | Iowa
Attorney General | Tom
Miller At least
eight states— Colorado, Connecticut, Louisiana, Maine, Minnesota, New Mexico,
North Carolina and Rhode Island — passed laws in 2007 to curtail predatory
lending. The
California Legislature is considering a law that would require many local
mortgage lenders to translate loan documents into Spanish, Chinese, Tagalog (the principal language of the Philippines),
Vietnamese or Korean if one of those languages had been used to negotiate the
loan. Baltimore
last week sued Wells Fargo Bank in federal court for allegedly steering black
home buyers into high-interest loans with non-traditional terms. The lawsuit
says the city is facing an "unprecedented crisis" of mortgage
foreclosures in predominantly black communities. Baltimore
Mayor Sheila Dixon said in a statement those foreclosures are depressing property
values and decreasing tax revenue. Wells Fargo, in a statement, denied the
charges. Early
this year, the Senate banking committee plans to consider legislation by Sen.
Chris Dodd, D-Conn., that bars mortgages that include financial penalties for
people who want to refinance and pay off their debt early. It also
prohibits brokers from steering borrowers to more expensive non-standard
loans if they qualify for a prime loan. The law would increase penalties for
lenders who violate the standards. "Going
forward, it seems to me if the states and feds can't figure out a way to
clean up this industry, shame on us," says Miller, who led a group of
state attorneys general in a class-action lawsuit against Ameriquest
Mortgage over allegations of bait-and-switch tactics. The
company settled the lawsuit in 2006 for $325 million. 'Overwhelming
problem' New laws
may offer little help to people already tied up in the bad loans, which grew
from new types of mortgages aimed at first-time home buyers with imperfect
credit. The
people targeted for complicated high-interest loans have expanded from
first-time minority homeowners and low-income elderly to include middle-class
borrowers, AARP attorney Nina Simon says. "There
are extraordinary numbers of these (cases) all over the country, says AARP
lawyer Jean Constantine-Davis, who handles many of the complaints that come
to the advocacy group for retired people. Public
interest lawyers say they are overwhelmed by the sheer number of cases and
frustrated by weak consumer-protection laws that rely on the buyer to beware.
"It's
not just a growing problem, it's an overwhelming problem," says Navid Vazire, a staff attorney
for the Foreclosure Prevention Project at South Brooklyn Legal Services. "We're
forced to turn most people away even if they have meritorious cases because
we don't have the capacity. We're turning away more and more people." The
pending cases illustrate a broad range of issues: •The AARP
Foundation sued 12 banks, real estate and mortgage companies in August on
behalf of eight first-time, minority home buyers for allegedly selling them
defective homes in New York for inflated prices and then steering them to
expensive loans. •A
mortgage company employee persuaded an 82-year-old man to refinance his
Brooklyn brownstone by promising a 1% interest rate, according to a lawsuit
filed by Vazire's group. "They
tricked him into signing documents that didn't reflect those terms," Vazire says. The 1%
interest rate lasted one day before climbing to 8%. •A man
purporting to be a "foreclosure prevention specialist" allegedly
persuaded a 60-year-old widow in San Pablo, Calif., to sign over the title of
her home in exchange for $6,000 to get her mortgage out of default, according
to a lawsuit filed against him. The man
allegedly used the equity in the home to secure two loans and demanded the
woman pay $330,000 to buy her home back, according to the lawsuit filed by
Housing and Economic Rights Advocates, an organization in Oakland. Barriers
to change Individual
cases can be challenging and are unlikely to motivate big lenders to change,
says Bob Gnaizda, general counsel for the
Greenlining Institute in Berkeley, Calif., a research and advocacy center. "The
best thing would be for a few of the great plaintiff class-action lawyers who
have put so much money into changing the tobacco industry, the asbestos
industry, to think about bringing class actions relating to predatory
lending," he says. States
and cities would take on questionable lending practices more aggressively if
federal law didn't limit them, Miller says. Iowa bans pre-payment penalties
but cannot enforce its law against nationally chartered banks or their
subsidiaries. Only the federal government can regulate federal banks and
their offshoots. "We
think it doesn't make any sense at all in terms of protecting the
citizens," Miller says. "States should be able to enforce state
law." |
The list
of resources below has been compiled for anyone that suspects that they may be
a victim of any type of fraud or scam. The list was originally designed as a
resource to report mortgage fraud, predatory lending scams and identity theft
in California but may also serve those who are victims of many types of fraud
in California. Other types of fraud may include:
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FBI Field Offices, Mortgage Fraud
White Collar Crime Supervisor
http://losangeles.fbi.gov/
11000 Wilshire Blvd., Suite 1700, FOB
Los Angeles, CA 90024-3672
Phone: (310) 477-6565
White
Collar Crime Supervisor
http://sacramento.fbi.gov/
4500 Orange Grove Avenue
Sacramento, CA 95841-4205
Phone: (916) 481-9110
White
Collar Crime Supervisor
http://sandiego.fbi.gov/
Federal Office Building
9797 Aero Drive
San Diego, CA 92123-1800
Phone: (858) 565-1255
White
Collar Crime Supervisor
http://sanfrancisco.fbi.gov/
450 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102-9523
Phone: (415) 553-7400
Attorney General's Office
California Department of Justice
http://ag.ca.gov/consumers/mailform.htm
Attn: Public Inquiry Unit
P.O. Box 944255
Sacramento, CA 94244-2550
Phone: (916) 322-3360
Fax: (916) 323-5341
HUD Field Office
Fresno Field Office
2135 Fresno Street
Suite 100
Fresno, CA 93721-1718
Phone: (559) 487-5033
Fax: (559) 487-5191
Los
Angeles Field Office
611 W. Sixth Street, Suite 800
Los Angeles, CA 90017
Phone: (213) 894-8007
Fax: (213) 894-8110
Sacramento Field Office
925 L Street
Sacramento, CA 95814
Phone: (916) 498-5220
Fax: (916) 498-5262
San
Diego Field Office
Symphony Towers, Suite 1600
750 B Street
San Diego, CA 92101-8131
Phone: (619) 557-5310
Fax: (619) 557-5312
Santa
Ana Field Office
Santa Ana Federal Building, Room 7015
34 Civic Center Plaza
Santa Ana, CA 92701-4003
Phone: (714) 796-5577
Fax: (714) 796-1285
HUD Regional Office
San Francisco Regional Office
600 Harrison St. 3rd Floor
San Francisco, CA 94107-1300
Phone: (415) 489-6400
Fax: (415) 489-6419
California Department of Corporations
Financial Services Division
http://www.corp.ca.gov/comp/fsdinst.htm
320 West 4th Street, Suite 750
Los Angles, CA 90013-2344
Toll-Free: (800) 347-6995 -- CA only
Phone: (213) 576-7690
Nationally Chartered Credit Unions
Region V – Tempe
http://www.ncua.gov/AboutNcua/org/Region5.htm
1230 W. Washington Street, Suite 301
Tempe, AZ 85281
Phone: (602) 302-6000
Fax: (602) 302-6024
State-Chartered Credit Unions
California Department of Financial Institutions
111 Pine Street, Suite 1100
San Francisco, CA 94111
Phone: (415) 263-8537
Fax: (415) 399-9515
Savings & Loan Association or Savings Bank
Office of Thrift Supervision
http://www.ots.treas.gov/resultsort.cfm?catNumber=88&dl=17&edit=1
E-mail: consumer.complaint@ots.treas.gov
West Region – San Francisco Regional Office
Pacific Plaza
2001 Junipero Serra Boulevard, Suite 650
Daly City, California 94014-1976
Mail: PO Box 7165
San Francisco, CA 94120-7165
Phone: (650) 746-7000
Fax: (650) 746-7001
Complaints: (800) 842-6929
Southern
California Area Office
Bentall Executive Center
551 North Tustin Avenue, Suite 1050
Santa Ana, California 92705-8635
Phone: (714) 796-4700
Fax: (714) 796-4710
Complaints: (800) 842-6929
Seattle
Area Office
101 Stewart Street, Suite 1010
Seattle, Washington 98101-2419
Phone: (206) 829-2600
Fax: (206) 829-2620
Complaints: (800) 842-6929
National Fair Housing Alliance
To locate your local office:
http://www.nationalfairhousing.org/html/memberOrgs/operating.htm
National Contact: E-mail: nfha@nationalfairhousing.org
1212 New York Avenue, NW Ste 525
Washington, DC 2005
Phone: (202) 898-1661
Fax: (202) 371-9744
California Department of Real Estate
http://www.dre.cahwnet.gov/
2201 Broadway
Sacramento, CA 95818-2500
Phone: (916) 227-0770
Fax: (916) 227-0777
California Office of
Real Estate Appraisers
http://www.orea.ca.gov/
1102 Q Street, Suite 4100
Sacramento, CA 95814
Phone: (916) 552-9000
Better Business
Bureaus
Better
Business Bureau
Sacramento
Valley Better Business Bureau
http://www.northeastcalifornia.bbb.org
E-mail: info@northeastcalifornia.bbb.org
400 S. Street
Sacramento, CA 95814-6997
Phone: (916) 443-6843
Fax: (916) 441-3356
Better
Business Bureau of the Southland
http://www.labbb.org
E-mail: info@labbb.org
PO Box 970
Colton, CA 92324-3052
Phone: (909) 825-7280
Fax: (909) 825-6246
Better
Business Bureau of San Diego
http://www.sandiego.bbb.org
E-mail: info@sandiego.bbb.org
5050 Murphy Canyon, Ste. 110
San Diego, CA 92123
Phone: (858) 496-2131
Fax: (858) 496-2141