Mitch Goldstein | Coach Mitch | October 20th, 2011Coach Mitch’s REFLECTIONS™
Part 3 of 4
Federal Bureau of Investigation
2010 Mortgage Fraud Report
Read the entire 52 page report: FBI: licensed brokers/bankers/lawyers do lots of mortgage fraud
The purpose of this study is to provide insight into the breadth and depth of mortgage fraud crimes perpetrated against the United States and its citizens during 2010.
Foreclosure Rescue
Foreclosure rescue schemes are often used in association with advance fee/loan modification program schemes. The perpetrators convince homeowners that they can save their homes from foreclosure through deed transfers and the payment of up-front fees. This “foreclosure rescue” often involves a manipulated deed process that results in the preparation of forged deeds. In extreme instances, perpetrators may sell the home or secure a second loan without the homeowners’ knowledge, stripping the property’s equity for personal enrichment. For example, the perpetrator transfers the property to his name via quit claim deed and promises to make mortgage payments while allowing the former home owner to remain in the home paying rent. The perpetrator profits from the scheme by re-mortgaging the property or pocketing fees paid by desperate homeowners. Often, the original mortgage is not paid off by the perpetrator and foreclosure is only delayed.
According to FBI case analysis, mortgage fraud foreclosure rescue investigations comprised 2 percent of all mortgage fraud cases opened in FY 2010.
Coach Mitch
I have never seen a foreclosure rescue scheme, nor have I heard of anyone doing it in my area; however a loan officer recently told me he knew of many situations where fraudulent foreclosure rescue occurred. In NY a law was passed that makes it so onerous to do foreclosure investing that it dried up. More government misapplied overkill. The government should have come down hard on any perpetrators of fraud. Instead, the government eliminated any hope a person in foreclosure has of selling to an investor, usually their only potential buyer. Now the banks get all the properties. I am told that the banks are not in the real estate business – more nonsense.
I found out about this law a bit too late. I had arranged an interview with the chief assistant to the gubernatorial candidate of the NYS Republican party along with another prominent investor, expressing misgivings about this potential law. The other investor said that the main witness for the law, who had testified before the state legislative committee, had been a client of his and the testimony was a complete fabrication and he could prove it. The chief assistant called to get a status report on the law and said that the law had been passed on the last day of the session along with hundreds of other laws and the governor had signed it into law just a few days previous.
In the future, I will write a complete analysis of this law, which is being copied in other states. I believe the law is totally unconstitutional.
Builder Bailout Schemes
Builders are employing builder bailout schemes to offset losses and circumvent excessive debt and potential bankruptcy as home sales suffer from escalating foreclosures, rising inventory, and declining demand. Builder bailout schemes are common in any distressed real estate market and typically consist of builders offering excessive incentives to buyers, which are not disclosed on the mortgage loan documents. In a common scenario, the builder has difficulty selling the property and offers an incentive of a mortgage with no down payment. For example, a builder wishes to sell a property for $200,000. He inflates the value of the property to $240,000 and finds a buyer. The lender funds a mortgage loan of $200,000 believing that $40,000 was paid to the builder, thus creating home equity. However, the lender is actually funding 100 percent of the home’s value. The builder acquires $200,000 from the sale of the home, pays off his building costs, forgives the buyer’s $40,000 down payment, and keeps any profits.
Coach Mitch
The bank underwriting [checking] is at fault, again. The bank merely needs to insist upon the actual verification of funds from the buyer. However, if the bank did this, then very few loans would close, so they just wink. But the FBI chases the builder instead of going after the bank. The FBI also is not going after the appraiser who must over appraise the property by the $40,000.
Debt Elimination/Reduction Schemes
FBI reporting indicates a continued effort by sovereign citizen domestic extremists throughout the United States to perpetrate and train others in the use of debt elimination schemes. Victims pay advance fees to perpetrators espousing themselves as “sovereign citizens” or “tax deniers” who promise to train them in methods to reduce or eliminate their debts. While they also target credit card debt, they are primarily targeting mortgages and commercial loans, unsecured debts, and automobile loans. They are involved in coaching people on how to file fraudulent liens, proof of claim, entitlement orders, and other documents to prevent foreclosure and forfeiture of property.
Coach Mitch
There is a legitimate line of philosophic thought surrounding the idea of the citizen as a “sovereign.” Learn about this issue yourself. The FBI labels these sovereign citizens “extremists.” See what you think about how our vaunted FBI mislabels citizens, the very people they are sworn to defend.
Legislative Issues
Dodd-Frank Act
The Dodd Frank Act (DFA) was created to address various issues that occurred during the financial crisis. According to MBA, the DFA will establish the Consumer Financial Protection Bureau (CFPB) and set strict standards and regulations for processing mortgage loans. To protect consumers from fraud, the CFPB will: (1) regulate strict guidelines for appraisers and licensing to appraisal management companies; (2) oversee and have total responsibility for consumer financial protection laws; (3) add more layers to disclosures, licensing, and process regulation with loan originators, reverse mortgages, mortgage companies, and advertising practices; and (4) harmonize the TILA and RESPA disclosure.
The new act will prohibit the use of BPOs as the primary benchmark for the value of a property being purchased. Additionally, the CFPB will oversee consumer protection laws, including TILA and RESPA. The DFA will require lenders to be accountable for the cost it provides to borrowers during the loan application process. The legislation will modernize the real estate appraisal regulation by enforcing actions against states and appraisers that do not abide by the new regulation. Also, there will be a new appraisal standard board and appraisers should follow the new regulations. The DFA is set to better regulate consumer protection laws and help reform Fannie Mae and Freddie Mac.
Coach Mitch
The answer of government is always and in all ways to expand its own power and reach. Government does this by making up more regulations. The newest iteration is the Consumer Financial Protection Board, CFPB.
Government creates mortgage regulation, for our “protection.” Bankers create ways to go around the rules so that they can do business. The result is a government created financial crises which is then “fixed” by the creation of a new super agency to make more rules.
BTW, the result of new regulation is always a business contraction and consolidation of an industry. In this case, already in New York State, fully one third of the mortgage brokers have gone out of business because of the new rules; see SAFE Act below.
Federal Trade Commission’s (FTC) Mortgage Assistance Relief Services (MARS) Rule
The FTC rule on MARS prohibits charging advance fees for loan modification services, but states that attorneys are the exception [because lawyers are known to have the highest of ethical standards ed.] to the rule and are therefore permitted to charge an advance fee provided some stipulations are met.
The Secure and Fair Enforcement Act
The Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act—enacted in July 2008— required states to have a licensing and registration system in place for all loan originators by July 31, 2010, to reduce mortgage fraud and enhance consumer protection.
Coach Mitch
This requires that anyone creating a mortgage must be licensed to do so. According to the new law, a regular citizen must be licensed as a mortgage originator if he wants to carry a mortgage against his own property, making it much harder to sell your own property, especially in a market where credit is tight. When banks won’t lend, virtually the only way selling can be done is if the seller carries the financing. The government has stopped this. The government makes a criminal out of someone trying to sell their home. Now that’s criminal. I believe that it is also unconstitutional.
Worse; the government puts conditions on creating a private loan such that the only persons who can be given a privately created loan are those who qualify for a regular bank loan. If the buyer could get a regular loan, then they would not need a seller to create a private loan. And you can’t create a private loan except with the same terms as a regular bank loan; hardly something you would do. Therefore, the government says you can still create a loan, if licensed, but they eliminate any real ability for you to do it. This bit of chicanery gets the “Miscreant Class” award for today.
The only way to fight evil is to overcome it. Fight fire with a conflagration. Fight the banks and government by making your own money and being independent. In this manner, as a good example to fellow citizens, we will win the day.
See Coach Mitch’s “Ridiculously Simple System…” ™ for details.
Gird your loins – the battles await,
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