Industry News

CFPB Seeks Comments on Proposed Mortgage Servicing Rule

CFPB Seeks Servicing Agent Comments on Proposed Mortgage Servicing Rules.  This is an important discussion for Service Providers who work for Mortgage Lenders

 LINK TO CFPB POST

By Erik Durbin and Paul Rothstein – MAY 04, 2017

Today, we’ve released our plan to assess the effectiveness of the Real Estate Settlement Procedures Act (RESPA) mortgage servicing rule. We are asking the public to comment on our plan, to suggest sources of data, and generally to provide other information that would help with the assessment.

Mortgage loan servicers are typically responsible for several activities relating to mortgage loans such as:

  • Processing loan payments
  • Responding to borrower inquiries
  • Keeping track of principal and interest paid
  • Managing escrow accounts
  • Reporting to investors
  • Pursuing collection and loss mitigation activities (including foreclosures and loan modifications) under certain circumstances

In January 2013, the CFPB issued the 2013 RESPA Servicing Final Rule. We amended the rule a few times before it took effect, and we refer to all of the requirements and related amendments that took effect on January 10, 2014, as the RESPA mortgage servicing rule. This rule gave borrowers new consumer protections related to mortgage loan servicing, many of which were aimed at helping consumers who were having trouble making their mortgage payments.

The RESPA mortgage servicing rule requires, among other things, that servicers provide disclosures to borrowers related to force-placed insurance, respond to errors asserted by borrowers in a timely manner, and follow certain procedures related to loss mitigation applications and communications with borrowers. For example, servicers generally must acknowledge written notices of error within five days and investigate and respond to the borrower in writing within 30 days. In general, the consumer protection purposes of RESPA include that servicers respond to borrower requests and complaints in a timely manner, maintain and provide accurate information, help borrowers avoid unwarranted or unnecessary costs and fees, and facilitate review for foreclosure avoidance options.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires us to review some of our rules within five years after they take effect. These formal reviews are called assessments. We are conducting an assessment of the RESPA mortgage servicing rule, and we will issue a report of the assessment by January 2019. As required by law, the assessment will address the rule’s effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act and the specific goals of the rule, using available evidence and data. We recently released our plan for the remittance rule assessment, as well.

We see conducting the assessment as an opportunity. Conducting the assessment will advance our knowledge of the benefits and costs of the key requirements of the RESPA mortgage servicing rule. The assessment will also provide the public with information on the mortgage servicing market, and help us to fulfill our commitment to be an evidence-based and effective agency.

We would like your help in improving the assessment.

We invite consumers, consumer advocates, housing counselors, mortgage loan servicers, industry representatives, and other interested parties to comment on our assessment plan. Comments can suggest sources of data, offer other recommendations, and generally provide information that would help us understand the rule’s effectiveness or improve this important work.

We are committed to well-tailored and effective regulations and have sought to carefully calibrate our efforts to ensure consistency with respect to consumer financial protections across the financial services marketplace.

Comments on the plan will be due 60 days after it is published in the Federal Register.

Learn more about your options and rights related to mortgage loans.

For more information on how to comply with the Bureau’s mortgage servicing rules, visit our implementation and guidance page.

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SEC Addresses Important Cyber-Security Measures for Service Providers

I just completed my PCI Compliance ( Payment Card Industry Data Security Standards report that requires specific security and use of qualified vendors who accept credit card payments on our behalf.) So  data security has been on my plate and on my mind.  I was particularly concerned after hearing about the recent ransom-ware attack that affected business, governments, hospitals and other entities computers in 75 countries including the US…. Scary stuff.

So it seems important to pass on the new SEC information on cyber-security.

“The staff observed a wide range of information security practices, procedures and controls across registrants that may be tailored to the firms’ operations, lines of business, risk profile and size,” as well as “firm practices during this Initiative that the staff believes may be particularly relevant to smaller registrants in relation to the recent WannaCry ransomware incident.”

Key findings from the examination, as reported in the alert, are as follows:

  • Cyberrisk assessment: “5 percent of broker-dealers and 26 percent of advisers and funds (collectively, ‘investment management firms’) examined did not conduct periodic risk assessments of critical systems to identify cybersecurity threats, vulnerabilities, and the potential business consequences.”
  • Penetration tests: “5 percent of broker-dealers and 57 percent of the investment management firms examined did not conduct penetration tests and vulnerability scans on systems that the firms considered to be critical.”
  • System maintenance: “All broker-dealers and 96 percent of investment management firms examined have a process in place for ensuring regular system maintenance, including the installation of software patches to address security vulnerabilities. However, 10 percent of the broker-dealers and 4 percent of investment management firms examined had a significant number of critical and high-risk security patches that were missing important updates.”

The SEC also noted that the Financial Industry Regulatory Authority (FINRA) has created a webpage with links to resources related to cybersecurity. It includes a cybersecurity checklist for small firms and a report on cybersecurity practices, which highlights effective practices for strengthening cybersecurity programs.

It is estimated that the ransomware attack affected more than 200,000 computers in about 150 countries, beginning May 12. The malicious software is known as “WannaCry,” “WCry” and “Wanna Decryptor,” which works by encrypting files and demands payment from users to regain access to their data.

“Initial reports indicate that the hacker or hacking group behind the attack is gaining access to enterprise servers either through Microsoft Remote Desktop Protocol (RDP) compromise or the exploitation of a critical Windows Server Message Block version 1 vulnerability,” the alert states. “Some networks have also been affected through phishing emails and malicious websites.

“To protect against the WannaCry ransomware, broker-dealers and investment management firms are encouraged to:

(1) review the alert published by the United States Department of Homeland Security’s Computer Emergency Readiness Team and

(2) evaluate whether applicable Microsoft patches for Windows XP, Windows 8, and Windows Server 2003 operating systems are properly and timely installed.”

MN Dept Commerce New E-license Website

The Minnesota Department of Commerce  has a new e-license Website regarding Closing Agent Licenses, look here for info:  https://mn.gov/elicense/a-z/?id=1083231369#/list/appId//filterType//filterValue//page/1/sort//order/

For the Abstracter Licensing the new  e-license link is: https://mn.gov/elicense/a-z/#/list/appId/0/filterType/Subject/filterValue/Abstracters/page/1/sort//order/

CFPB Fines Mortgage Lender, Real Estate Brokers and Servicer

CFPB Orders Prospect Mortgage to Pay $3.5 Million Fine for Illegal Kickback Scheme

Real Estate Brokers and Mortgage Servicer also Ordered to Pay $495,000

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals. The CFPB also took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Under the terms of the action announced today, Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.

“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”

Prospect Mortgage, LLC, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the United States, with nearly 100 branches nationwide. RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements. Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.

The CFPB is responsible for enforcing the Real Estate Settlement Procedures Act, which was enacted in 1974 as a response to abuses in the real estate settlement process. A primary purpose of the law is to eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. The law covers any service provided in connection with a real estate settlement, such as title insurance, appraisals, inspections, and loan origination.

Prospect Mortgage

Prospect Mortgage offers a range of mortgages to consumers, including conventional, FHA, and VA loans. From at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. For example, Prospect established marketing services agreements with companies, which were framed as payments for advertising or promotional services, but in this case actually served to disguise payments for referrals. Specifically, the CFPB found that Prospect Mortgage:

  • Paid for referrals through agreements: Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.
  • Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify with Prospect: One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.
  • Split fees with a mortgage servicer to obtain consumer referrals: Prospect and Planet Home Lending had an agreement under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Prospect compensated Planet for the referrals by splitting the proceeds of the sale of such loans evenly with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet.

Under the consent order issued today, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company is prohibited from future violations of the Real Estate Settlement Procedures Act, will not pay for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.

The consent order filed against Prospect Mortgage is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_ProspectMortgage-consent-order.pdf

ReMax Gold Coast and Keller Williams Mid-Willamette

ReMax Gold Coast and Keller Williams Mid-Willamette are real estate brokers that work with consumers seeking to buy or sell real estate. Brokers or agents often make recommendations to their clients for various services, such as mortgage lending, title insurance, or home inspectors. Among other things, the Real Estate Settlement Procedures Act prohibits brokers and agents from exploiting consumers’ reliance on these recommendations by accepting payments or kickbacks in return for referrals to particular service providers.

The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.

Under the consent orders filed today, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.

The consent order filed against ReMax Gold Coast is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_RGCServices-consent-order.pdf

The consent order filed against Keller Williams Mid-Willamette is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_Willamette-Legacy-consent-order.pdf

Planet Home Lending

In 2012, Planet Home Lending signed a contract with Prospect Mortgage that facilitated the payment of illegal referral fees. The company’s practices violated the Real Estate Settlement Procedures Act and the Fair Credit Reporting Act. Specifically, the CFPB found that Planet Home Lending:

  • Accepted fees from Prospect for referring consumers seeking to refinance:Under their arrangement, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
  • Unlawfully used “trigger leads” to market to Prospect to consumers: Planet ordered “trigger leads” from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. This was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers.

Under the consent order filed against Planet Home Lending, the company will directly pay harmed consumers a total of $265,000 in redress. The company is also prohibited from violating the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.

The consent order filed against Planet Home Lending is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_PlanetHomeLending-consent-order.pdf

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

 

CFPB Issues Mortgage Complaint Report

The latest CFPB Complaint Report for Mortgages shows that, by far, the largest number of complaints filed with the CFPB were with the Credit Reporting Agencies – Equifax, TransUnion and Experian, having 3,897 complaints nationwide on credit reports in January.  Mortgage complaint leaders were Wells Fargo, Bank of America and JP Morgan Chase. To read the latest full mortgage report: click here for CFPB Complaint Report.

The Consumer Financial Protection Bureau (CFPB) is the first federal agency solely focused on

consumer financial protection,1 and consumer complaints are an integral part of that work. The

CFPB helps connect consumers with financial companies to make their voices heard. When

consumers submit a complaint, they work with companies to get the consumer a response,

generally within 15 days. They also publish basic information about complaints in our public

Consumer Complaint Database to empower consumers, inform consumer advocates, and improve the functioning of the marketplace.

HUD REACHES SETTLEMENT AGREEMENTS COMPANIES RE: VIOLATING FAIR HOUSING ACT

HUD Press Release
Thursday January 26, 2017

WASHINGTON – The U.S. Department of Housing and Urban Development announced agreements with two insurance companies in Ohio and Florida settling allegations the companies violated the Fair Housing Act by denying insurance coverage to properties that contain “subsidized housing” and “low-income housing.”

The Fair Housing Act makes it unlawful for providers of housing-related services or products, including insurance providers, to discriminate because of race, color, religion, sex, national origin, disability, and familial status.

The agreements stemmed from a Secretary-Initiated complaint HUD filed after receiving reports the insurance companies’ policies and practices had a discriminatory effect because of race and national origin. Specifically, HUD’s complaint alleged that the companies refused to provide umbrella coverage, which provides additional liability coverage when an insured’s other primary policy limits have been reached, to properties containing subsidized or low-income housing.

Under the agreements, McGowan and Company will remove “subsidized” and “low-income” from its list of prohibited properties, spend $100,000 to affirmatively market its services and products to the affordable and low-income housing markets and provide fair housing training for management and staff that review and/or approve applications for insurance. Mack & Waltz will spend $10,000 to affirmatively promote its services in affordable and low-income housing markets, and provide fair housing training for its management and staff.

People who believe they have experienced discrimination may file a complaint by contacting HUD’s Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY). Housing discrimination complaints may also be filed by going to www.hud.gov/fairhousing, or by downloading HUD’s free housing discrimination mobile application, which can be accessed through Apple and Android devices.

 

Existing-Home Sales Slide in December; 2016 Sales Best Since 2006

Press Release

WASHINGTON (January 24, 2017) — Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, according to the National Association of Realtors®.

Total existing-home sales 1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).

In December, existing sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month’s slide, sales are only 0.7 percent higher than a year ago.

Lawrence Yun, NAR chief economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”

Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”

The median existing-home price 2 for all housing types in December was $232,200, up 4.0 percent from December 2015 ($223,200). December’s price increase marks the 58thconsecutive month of year-over-year gains.

Total housing inventory 3 at the end of December dropped 10.8 percent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory is 6.3 percent lower than a year ago (1.76 million), has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace (3.9 months in December 2015).

“Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction,” said Yun. “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels. More needs to be done to address the regulatory and cost burdens preventing builders from ramping up production.”

According to Freddie Mac, the average commitment rate(link is external) for a 30-year, conventional, fixed-rate mortgage surged in December to 4.20 percent from 3.77 percent in November. December’s average commitment rate was the highest rate since April 2014 (4.32 percent).

First-time buyers were 32 percent of sales in December, which is unchanged both from November and a year ago. First-time buyers also represented 32 percent of sales in all of 2016. NAR’s 2016 Profile of Home Buyers and Sellersreleased in late 2016 4 — revealed that the annual share of first-time buyers was 35 percent.

“Constrained inventory in many areas and climbing rents, home prices and mortgage rates means it’s not getting any easier to be a first-time buyer,” said Yun. “It’ll take more entry-level supply, continued job gains and even stronger wage growth for first-timers to make up a greater share of the market.”

On the topic of first-time- and moderate-income buyers, NAR President William E. Brown, a Realtor® from Alamo, California, says Realtors® look forward to working with the Federal Housing Administration to express why it is necessary to follow through with the previously announced decision to reduce the cost of mortgage insurance. By cutting annual premiums from 0.85 percent to 0.60 percent, an FHA-insured mortgage becomes a more viable and affordable option for these buyers.

“Without the premium reduction, we estimate that roughly 750,000 to 850,000 homebuyers will face higher costs and between 30,000 and 40,000 would-be buyers will be prevented from entering the market,” he said.

Properties typically stayed on the market for 52 days in December, up from 43 days in November but down from a year ago (58 days). Short sales were on the market the longest at a median of 97 days in December, while foreclosures sold in 53 days and non-distressed homes took 50 days. Thirty-seven percent of homes sold in December were on the market for less than a month.

Inventory data from Realtor.com® reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in December were San Jose-Sunnyvale-Santa Clara, Calif., 49 days; San Francisco-Oakland-Hayward, Calif., and Nashville-Davidson-Murfreesboro-Franklin, Tenn., 50 days; and Billings, Mont., and Hanford-Corcoran, Calif., both at 51 days.

All-cash sales were 21 percent of transactions in December, unchanged from November and down from 24 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in December, up from 12 percent in November and unchanged from a year ago. Fifty-nine percent of investors paid in cash in December.

Distressed sales 5 — foreclosures and short sales — rose to 7 percent in December, up from 6 percent in November but down from 8 percent a year ago. Five percent of December sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 20 percent below market value in December (17 percent in November), while short sales were discounted 10 percent (16 percent in November).

Single-family and Condo/Co-op Sales

Single-family home sales declined 1.8 percent to a seasonally adjusted annual rate of 4.88 million in December from 4.97 million in November, but are still 1.5 percent above the 4.81 million pace a year ago. The median existing single-family home price was $233,500 in December, up 3.8 percent from December 2015.

Existing condominium and co-op sales dropped 10.3 percent to a seasonally adjusted annual rate of 610,000 units in December, and are now 4.7 percent below a year ago. The median existing condo price was $221,600 in December, which is 5.5 percent above a year ago.

Regional Breakdown

December existing-home sales in the Northeast slid 6.2 percent to an annual rate of 760,000, but are still 2.7 percent above a year ago. The median price in the Northeast was $245,900, which is 3.8 percent below December 2015.

In the Midwest, existing-home sales decreased 3.8 percent to an annual rate of 1.28 million in December, but are still 2.4 percent above a year ago. The median price in the Midwest was $178,400, up 4.6 percent from a year ago.

Existing-home sales in the South in December were at an annual rate of 2.25 million (unchanged from November), and are 0.4 percent above December 2015. The median price in the South was $207,600, up 6.5 percent from a year ago.

Existing-home sales in the West fell 4.8 percent to an annual rate of 1.20 million in December, and are now 1.6 percent below a year ago. The median price in the West was $341,000, up 6.0 percent from December 2015.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Minnesota Considers New Ag Tax Credit for Farmers

Author Comment:  In spite of Green Acre taxes, Minnesota Farmers face heavy real estate taxes on farmland, causing them to vote against independent school district referendums. So look for a new tax search to follow along with deferred Green Acre and Open Space  Taxes.   Lt. Gov. Tina Smith is working to help resolve this. 

Daily Globe | January 20, 2017

Smith called the current situation a perfect storm. Farmers are suffering from low commodity prices, high land values and, for many, crushing health care costs. The prospect of their property taxes increasing by hundreds or thousands of dollars sent many to the polls in November to vote down building bond referendums like the one for ISD 518.

“The farm economy has been struggling for the past few years. Rising property tax bills are not what’s needed across the state,” said Minnesota Agriculture Commissioner David Frederickson. Noting that property taxes have increased by 114 percent for Minnesota farmers in the past decade, Frederickson said a majority of levy referendums in rural Minnesota failed in 2016, while the majority of levy referendums posed to city dwellers passed.

Read More on this

California Man Gets Two Years in Title Theft Scheme

   

press release

11/20/2016

Daniel Deaibes was sentenced recently to 24 months for his role in a scheme to steal title to Southern California homes and then “sell” the properties to unsuspecting buyers – before the buyers realized who the true owners were.

From September 2012 through their arrest in November 2014, Deaibes and his co-conspirators, including co-defendants Mazen Alzoubi and Mohamed Daoud, fraudulently sold or attempted to sell at least 15 homes worth more than $3.6 million that actually never belonged to them. On at least 10 occasions, they were successful—earning illicit proceeds of nearly $2.2 million.

Deaibes pleaded guilty in March 2015 to participating in the fraud and was sentenced today by U.S. District Judge Cynthia Bashant. As part of this plea, Deaibes admitted that he used aliases to deceive escrow and title officers into believing that he was “John Moran,” and that he was the true owner of property that was being marketed for sale. In fact, “John Moran” did not exist, and Deaibes and his co-conspirators planned to fraudulently sell the properties, divert the proceeds to their own bank accounts, and then quickly disburse the money overseas. On at least three occasions, Deaibes, posing as “Moran” and presenting a fake driver’s license, appeared before notaries to sign title documents and property deeds.

To make it appear that they owned these properties, the co-conspirators generated forged deeds that made it appear the true property owner had sold his or her home to a sham real estate “investment” business the co-conspirators controlled. They forged the true owners’ signatures on the deeds, and used forged notary stamps to make them appear legitimate. In reality, though, the true owners were entirely unaware of the pretend sales. Once the fraudulent documents were recorded in the chain of title, Alzoubi (using aliases and stolen identities) listed the properties for sale, posing to buyers, escrow companies, and title officers as the new owner. In this way, the co-conspirators collected all the proceeds of the sale, and the true owners were left with nothing.

Alzoubi, the ringleader of the fraudulent scheme, assumed multiple fake identities to keep the scheme going. He also posed as real people, pretending on one occasion that he was an attorney for one of the true owners. (Unbeknownst to Alzoubi at the time, he was talking to an undercover federal agent.) As a result of his greater role in the scheme, Alzoubi was charged with, and in January 2016 pleaded guilty to, aggravated identity theft, which carries a mandatory sentence of two years in prison in addition to his sentence for the fraud and money laundering. His sentencing is scheduled for November 7, 2016, at 9:00 am, before Judge Bashant.

Mohamed Daoud also pleaded guilty, in July 2015, admitting that he helped Alzoubi launder the proceeds of the scheme. They used Daoud’s company, “Norway LLC,” to pretend to acquire title to some of the properties. Daoud received approximately $270,000 in proceeds. In December 2015, before he was sentenced, Daoud fled the country and is now a fugitive.

Most of the properties the co-conspirators “sold” were post-foreclosure properties owned by banks or institutions such as Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are governmentsponsored enterprises with a mission to provide liquidity, stability, and affordability to the United States housing and mortgage markets. As part of this mission, Fannie Mae and Freddie Mac purchase residential mortgages in the secondary market, enabling lenders to replenish their funds to finance additional single family loans. Fannie Mae and Freddie Mac can become the property owners if they own the mortgage loan at the time a home is foreclosed.

“Schemes like this one undermine the public’s confidence in their most personal and important investment, their homes,” said U.S. Attorney Laura Duffy. “I am committed to prosecuting people who continue to prey on the victims of the devastating mortgage meltdown, and sending those criminals to prison.”

“This scheme was designed to literally rip home ownership right out of the hands of innocent victims, and for those victims the costs were far greater than a title to a house,” said Leslie P. DeMarco, Special Agent in Charge, Western Region. “This scheme is callous and the perpetrators deserve the punishment set out for them. FHFA-OIG remains committed to our relentless pursuit of individuals who try to profit from the aftermath of the housing crisis.” “

Fraud targeting a family’s home, the heart of a family’s financial investment, has a ripple effect through our nation’s economy,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI is committed to investigate and uncover schemes by those who defraud homeowners.”

In addition to his jail sentence, Deaibes was ordered to pay $1,819,591 in restitution to the victims of the fraud.

 

CFPB Updates Use of Service Providers

On October 31st, the CFPB issued updates to lenders  on use of Service Providers. This appears to allow a bit more flexibility for the lender to handle day to day affairs with its Servie Providers and is good news for title companies, abstracting and closing companies.  The update states:

“The Bureau is reissuing its guidance on service providers, formerly titled CFPB Bulletin 2012-03, Service Providers to clarify that the depth and formality of the risk management program for service providers may vary depending upon the service being performed—its size, scope, complexity, importance and potential for consumer harm—and the performance of the service provider in carrying out its activities in compliance with Federal consumer financial laws and regulations. This amendment is needed to clarify that supervised entities have flexibility and to allow appropriate risk management.”

Lenders continue to be advised to:

take steps to review Service Providers and should include, but are not limited to:

  • Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law;
  • Requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities;
  • Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices;
  • Establishing internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law; and
  • Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate.

For more information pertaining to the responsibilities of a supervised bank or nonbank that has business arrangements with service providers, please review the CFPB’s Supervision and Examination Manual: Compliance Management Review and Unfair, Deceptive, and Abusive Acts or Practices.[3]

 

 

 

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association