FACTS
The operators of an allegedly deceptive mortgage modification business will pay more than $750,000 in ill-gotten gains to settle Federal Trade Commission charges. The settlements also permanently ban the 11 defendants from selling any mortgage assistance relief products.
The FTC’s case against four operators of the Debt Advocacy Center and another group of seven defendants that allegedly provided “forensic audits” to consumers is still ongoing against others.
According to the complaint filed by the FTC in November 2009 the Debt Advocacy Center defendants charged consumers $1,500 in advance and claimed a 90% success rate for obtaining mods. These four defendants also allegedly promised a refund of $1,500 or more if they were unable to obtain a loan modification. The complaint alleged that when consumers did not get the modification, the Debt Advocacy Center told them the $1,500 was only for advice and educational materials and refused to return payments from consumers. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants' assets, pending resolution of the case.
The FTC later alleged that another group of seven defendants was involved in the operation. The scheme purportedly involved checking a homeowner’s loan documents for law violations that would give them leverage in negotiating with lenders to obtain a loan modification or a short sale of a house for an amount that was less than the mortgage balance. The forensic audit defendants collected $995 in advance for each audit even though an audit was unlikely to aid negotiations with lenders, the complaint alleged.
Under the settlements, all 11 defendants are permanently banned from selling any mortgage assistance relief services. All the defendants will be prohibited from misrepresenting any relevant facts about the marketing or sale of financial products and will need to provide support for any claims they make about the products. The four Debt Advocacy Center defendants also will be barred from misrepresenting the relevant facts about any product they market or sell.
Under the proposed settlements, the forensic audit defendants Credit Services Alliance Inc., Maurice Jackson, Patrick Butler and Bradford R. Geisen will pay a judgment of $527,000. Glenn E. Gromann, John W. Smith, and CreditLawGroup, P.A. are not subject to any monetary provisions.
The $1.8 million judgment against Debt Advocacy Center defendants Edward J. Davidson, The Debt Advocacy Center, LLC, and Smith, Gromann & Davidson, P.A. will be suspended, based on inability to pay, when Davidson turns over certain real estate and personal property to the FTC for liquidation, and pays $37,000 in installments to the FTC. These payments are secured by his interest in a movie called The Derby Stallion.
The $717,000 judgment against Debt Advocacy Center defendant Kevin McCormick will be suspended, based on inability to pay, when McCormick transfers approximately $20,000 from an inheritance trust to the FTC.
If it is later determined that the financial information provided to the FTC by these defendants was false, the full amount of their judgments will become due. (To read the consent decree go to Northern District of Ohio, Eastern Division United States District Court Case NO.1 :09CV02712)
MORAL
Loan modifications where fees are collected in advance do not legally exist. Forensic audits in this attorney’s opinion are worthless and that is borne out by this case and others like it.
SHORT SALES IN CALIFORNIA SEND REAL ESTATE SALESPERSON INVOLVED TO JAIL
FACTS
Real estate salesperson Matthew Wayne Stewart pled guilty to conspiracy to commit real estate fraud stemming from his actions in two short sale transactions.
In October 2010, the California Department of Real Estate filed an action against Stewart accusing him of, among other things, receiving illegal secret profits in two separate short sale transactions. Stewart was accused of entering into two separate short sale listing agreements wherein the allowable compensation to be paid to the licensees could not exceed 7% of the sales price. However, Stewart was accused of exceeding the compensation limitation by requiring the buyers to pay an additional 3% short sale negotiation fee, a fee that was concealed and not disclosed to the lenders or sellers.
On Dec. 28, 2011 the attorney general's office filed felony charges against Stewart for defrauding buyers and sellers in short sale transactions in Placer and Nevada counties. On April 18, Stewart pled guilty to conspiracy to commit real estate fraud stemming from the above transactions wherein Stewart “fraudulently collected two short sale fees to which he was not lawfully entitled.” As part of the plea, Stewart was required to surrender his real estate license, serve 90 days in jail, pay restitution of approximately $25,000, and be on formal probation for three years. On June 12, Stewart’s voluntary license surrender became effective. (drewbst61812)
MORAL
Making profits on short sales by doing a double escrow type transaction, not disclosing the higher bid, charging buyers' fees not disclosed, will cause criminal charges to be filed and then you will need legal counsel.
FIVE CALIFORNIA MEN PLEAD GUILTY TO MORTGAGE FRAUD
FACTS
On June 22, five people with ties to a Hayward mortgage brokerage company pleaded guilty in federal court to wire fraud, conspiracy to commit wire fraud and filling out false statements.
Idriss Safdari, Hasina Safdari and Nicholas Munoz will be sentenced in October, while Josue Loayza and Thomas Gomez will be sentenced in August. Their guilty pleas stemmed from numerous fraudulent loan applications.
The Safdaris owned Palm Tree Financial and Realty, a mortgage brokerage company that was located in Hayward. Loayza and Gomez were employed there as loan agents, and Munoz was a licensed tax preparer. Munoz submitted the fraudulent letters to lenders on behalf of the various Palm Tree borrowers, among them Hasina Safdari
Hasina Safdari, Loayza and Gomez admitted they knowingly sent mortgage lenders loan applications that listed false information regarding income and assets. Munoz admitted he was paid $200 to sign a fraudulent letter on the letterhead of his company, Professional Tax Services LLC, that falsely stated he had prepared Hasina Safdaris' taxes for four years. The letter went out to Hasina Safdari so he could purchase a property.
Idriss Safdari admitted lying to FBI agents and the Internal Revenue Service, claiming Palm Tree paid him about $70,000 per year in 2006 and 2007 when he actually earned several hundred thousand dollars more that. Palm Tree is no longer in business.
In a separate civil action, Munoz agreed to a permanent injunction barring him from owning or operating any business involved with preparing taxes, the release said. (sjmercnws62212)
MORAL
For $200, the tax preparer writes a false letter. Now he is guilty of a federal felony and barred from having anything to do with probably the only type of business he knows: tax returns. Somehow $200 seems a stupid price considering the penalty.
FORMER RE AGENT CONVICTED OF MORTGAGE FRAUD IN OKLAHOMA
FACTS
On June 22, Safiyyah Tahir Battles, formerly a real estate agent with T&T Realty in Oklahoma City, was convicted of mortgage fraud and money laundering after a five-day trial.
On Nov. 15, 2011, Battles was indicted on three counts: making a false statement to First Security Bank, using an interstate wire facility to defraud Saxon Mortgage, and engaging in a monetary transaction with more than $10,000 from the proceeds of crime. A jury found her guilty on the second and third counts. It was unable to reach a unanimous verdict on the first count.
During late 2006 and early 2007, Battles borrowed about $375,000 from First Security Bank to build a house in Oklahoma City. She intended the house to be her personal residence. In April 2007, she used her sister’s mortgage brokerage company, Lending Leaders, to apply for a $500,000 loan from Saxon Mortgage of Fort Worth, Texas. Saxon required her to provide 12 months of bank statements to support her income and assets. The jury heard evidence that the bank statements had been altered by adding more than $100,000 to the ending balance on each statement, by deleting her husband’s name as an account holder, and by removing numerous overdraft fees. At the closing on May 4, 2007, Battles signed a final loan application that stated falsely that she earned $344,677.92 per year and had $165,907.70 in her bank account. According to a tax return that Battles filed in March of 2009, her adjusted gross income for 2006 was $14,001; according to the records of First Security Bank, her actual account balance on May 4, 2007, was $852.50.
Based on the application information, a forged letter, and communications with the mortgage brokerage on the day of closing, Saxon Mortgage authorized $102,630.01 from the loan proceeds to be paid to a local builder. Battles took the $102,630.01 check at closing, deposited into her bank account, and used it for her own purposes. The third count relates to a $15,000 check that Battles wrote to her mother, Trina Tahir, two days after she deposited the $102,630.01 check.
Battles faces a maximum punishment of 20 years in prison and a fine of $250,000 on the wire fraud count. On the money laundering count, she faces a potential penalty of 10 years in prison and a fine of $250,000. She will also be required to pay restitution to Saxon Mortgage, which lost over $300,000. (usattywdok62212)
MORAL
Note that she went to trial within seven months of being indicted and that the federal agents went back to a loan over six years old in 2006. Anyone do bad loans in 2006 or 2007? Maybe that person should consult with legal counsel before federal agents consult with the person.
WEST VIRGINIA APPRAISER PLEADS GUILTY TO APPRAISAL FRAUD-FACES 30 YEARS IN PRISON
FACTS
Larry Max McDaniel. 69, of Parkesburg, W. Va., a real estate appraiser who once held an appointed position in West Virginia state government, faces up to 30 years in federal prison for falsifying appraisal records in North Carolina. He pled guilty to making false statement to financial institutions and “aiding and abetting” in U.S. District Court in Raleigh, N.C.
McDaniel was the former head of the West Virginia Real Estate Appraiser Licensing and Certification Board. He also served on the board's disciplinary committee and taught courses at West Virginia University in the 1990s. In 2004, he became a Certified National Instructor for appraisals.
McDaniel admitted to cooperating in a scheme organized by the head of a development firm called AP LLC. The head of that company, referred to in court documents only as "JTW," allegedly promised investors that he and AP LLC would use their money to buy homes at a low cost, renovate them and then sell them to first-time home buyers for a higher value.
Prosecutors said McDaniel worked with a business associate named Jackie Gale Weaver Jr. to prepare false appraisal reports for the properties.
Weaver, who was not a licensed appraiser, would use McDaniel's name and appraiser's seal to draft appraisal reports on AP LLC properties. Investigators said measurements, sketches, and photographs of supposed renovations were either supplied by third parties or by AP LLC officials themselves.
The appraisals claimed McDaniel conducted physical inspections of the properties and interviewed the owners, but authorities found no evidence McDaniel ever visited the North Carolina properties or conducted interviews. In spite of that, McDaniel still regularly invoiced and received payment from AP LLC for each of the appraisals.
Indictments alleged that McDaniel and Weaver falsified as many as 200 appraisals in this fashion between late 2002 and May 2006. Weaver pleaded guilty to conspiring to make false statements to influence financial institutions last September. His sentencing hearing has been set for Aug. 6.
An appraiser since 1975, McDaniel has been a prominent name in the state appraisal industry. He has been under fire in civil lawsuits for allegedly inflating appraisals to benefit mortgage companies. McDaniel agreed to step down from the state appraisers board as a result of one of those lawsuits.
McDaniel is scheduled to appear before Chief District Judge James Dever III Sept. 17 for sentencing. He faces up to 30 years in prison followed by up to five years supervised release and a maximum $250,000 fine. (mtgedly62012)
MORAL
Great reputation, well-respected in the community and now gives it all up to risk spending time in a federal prison which does not have parole and where at least 85% of the sentence must be served. I would like you to pay particular attention to the fact that the prosecutors went back 10 years to 2002 to prosecute people involved with these loans!
MORTGAGE DEBT RELIEF ACT OF 2007 TO BE EXTENDED TO 2015?
FACTS
In March 2012 H.R.'s 4202, 4250, 4290 and 4336, as well as S. 2250 and 3224 were introduced in Congress to extend the Mortgage Debt Relief Act through the end of 2015.
MORAL
Watch the bills for further action to see if anyone is extending the time and is signed by the President. With six bills pending I would say there is a good chance the Debt Relief Act will be extended to help the consumer with debt relief in the foreclosure of short sale of the principal residence.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
