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Tales From the Closing Table

Sep 12, 2014

The mortgage closing transaction is the single largest financial transaction in the lives of most consumers, and it is also the riskiest stage of the mortgage process for lenders. While the vast majority of lawyers and notaries and title agents are experienced, ethical and diligent professionals, for a few the role of closing agent is too tempting a lure for selfish criminal intent. This monthly column addresses the good, the bad and the ugly … Top industry news … Goodbye Fannie and Freddie? Rep. Maxine Waters, the ranking Democrat on the House Financial Services Committee introduced another proposal for housing finance reform on March 27. The proposed Housing Opportunities Move the Economy (HOME) Forward Act, calls for the wind-down of Fannie Mae and Freddie Mac within five years, replacing Fannie and Freddie with a cooperative of lenders that would be the sole issuer of mortgage-backed securities (MBS) guaranteed by the government—thus creating an entity akin to a mortgage "utility." Waters' proposal also calls for the establishment of a Mortgage Insurance Fund that would provide a federal guarantee on eligible mortgages and would establish yet another new regulator, the National Mortgage Finance Administration (NMFA), to oversee the Federal Home Loan Banks and the new cooperative. You can’t make this stuff up! ►A Florida bank executive was sentenced to three years in prison for fraudulently obtaining more than $2 million worth of mortgages on two properties in North Carolina. He did so by utilizing straw purchasers to purchase the properties, and by lying about the income and assets of these straw purchasers on loan applications. Both of these properties ultimately went into foreclosure, resulting in a loss of more than $1 million to the lenders. Trust me, he told them, I read all of Carlton Sheets’ books. ​►An Oklahoma real estate agent was charged with inducing lenders to fund mortgages based on inflated real estate prices and misrepresenting the distribution of excessive loan proceeds to him as commissions and bonuses. So that’s why the RE commission was listed at 20 percent on the HUD! ​►A North Carolina attorney was sentenced to 18 months in prison for orchestrating a mortgage fraud scheme that cost lenders nearly $3 million. The lawyer falsified HUD-1 statements to misrepresent the amount of money the borrower brought to closing, the payment of closing funds to secondary, prior lien holders, and the amount of money actually paid to her for legal fees. Those law school student loans can be a real pain to pay off! ​►Another attorney, this one out of Missouri, was arrested on an indictment charging him with falsifying documents to obtain a line of credit on a home which did not belong to him, as well as aggravated identity theft. According to the indictment, the lawyer submitted a false loan application in order to obtain a $100,000 line of credit. The individual home owner was unaware of the application.  He needed the money for St. Louis Cardinals season tickets (it’s not cheap folks). Regulatory updates … The Consumer Financial Protection Bureau (CFPB) ordered a Connecticut mortgage lender to pay $83,000 as a penalty for illegally splitting real estate settlement fees. This after the company “self-reported” the violation in a surprising mea culpa. “These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB Director Richard Cordray in a released statement. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.” On the lighter side … A bank auditor dies in poverty and so his friends decide to raise funds for his funeral. A colleague walks into a local mortgage lender’s offices and asks if the owners would care to donate $100 for the fund. "What's it for?" they ask, and the man tells him. So the president calls his accounting department and within minutes hands over a check for $1,000 saying, "Here … go and bury 10 of them." Andrew Liput has been a corporate, real estate and banking attorney for more than 25 years. He is the founder, chief executive officer and president of Secure Settlements Inc., the first data intelligence and risk analytics firm to offer specialized vendor management services addressing settlement agent risk to mortgage lenders and banks nationwide. He can be reached by e-mail at [email protected]. This article orignally appeared in the April 2014 edtion of National Mortgage Professional Magazine. 
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Sep 12, 2014
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