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The Ten Warning Signs of Predatory Lending
The questions below are a good way for you to know if someone could be misleading you about a loan and its costs to you. Just because you answer "yes" to these questions does not mean you are or have been a victim of predatory lending. But, if you answer "yes" to some of the questions, we recommend you contact the appropriate state agency, by clicking on the Report Abusive Lending link above, for more information and guidance.
1. Were you encouraged to include false information on your loan application?
2. Were you asked to leave signature lines or any other important line-item of any form blank? Did the lender or broker alter any information you entered on your loan application?
3 . Check your loan file. Are any of the following disclosures missing?
4 . Have you refinanced your loan several times, and in each instance increased either your monthly payment and/or the total amount you owe on your home?
5 . Do your documents reveal that your interest rate calculation will change to require you to pay "daily interest" in instances when your payments are late?
6 . Is your loan amount on the loan you obtained higher than the value of the home?
7 . Did you incur any unexpected costs at settlement that were not explained to you prior to the settlement?
8 . After settlement, were you surprised to find that the monthly payments on your mortgage loan were higher than you anticipated based on the initial disclosures?
9 . If you have a balloon loan (one in which after a series of low pay-ments the entire loan balance is due in a large lump sum),will you need to obtain another loan to finance that final lump-sum amount?
10 . Were you required to buy credit insurance, insurance that will repay the debt if you die or become disabled? (Note: Credit insurance is optional and will not affect your loan decision if you decline to buy it. It can, however, add considerable cost to the loan transaction. You should decide whether you are going to pur-chase credit insurance carefully.).
http://moneycentral.msn.com/content/SavingandDebt/P68724.asp
A new study from Public Citizen outlines dirty tricks, calls for reforms and offers shoppers some advice.
By MSN Money Staff
A report released Monday by Public Citizen , the consumer watchdog group founded by Ralph Nader, accuses the nation's car dealers of wholesale fraud and asks all state attorneys general to investigate.
The scams include:
By Gregory J. Wilcox
A strong housing market featuring double-digit appreciation drove foreclosure activity down during the third quarter by an annualized 12 percent to the second-lowest total since 1992, an industry tracker said Monday.
Lenders initiated foreclosure proceedings by sending notices of default to 15,814 homeowners during the July-to-September period. That's a 3.1 percent increase from the second quarter, but down from 17,974 notices in the year-ago period, according to La Jolla-based DataQuick Information Systems. This year's second-quarter activity was the lowest since the company started keeping records in 1992. The peak came in the first quarter of 1996, when lenders initiated 44,665 foreclosure proceedings as the housing market hit bottom.
About 70 percent of the owners in arrears in 1996 lost their homes.
"They would just put the keys in the mail and send them back to the lender, throw up their arms and walk away," said John Karevoll, a DataQuick analyst.
At that time, home prices in California were decreasing at an annual rate of 2.7 percent, and the median price -- the point at which half the units sold for more and half for less -- was $150,000.
In contrast, the median price in the third quarter this year was $323,000, an annualized increase of 18.6 percent, and more than 85 percent of owners who get default notices today hang on to their homes.
"Default activity is always low when appreciation rates are strong because the increase in equity means that few homeowners owe more on their property than they ... (have in equity) on it," said Marshall Prentice, DataQuick president.
San Francisco had one of California's biggest increases in foreclosure activity, 22.9 percent, reflecting home prices that are still high but flat.
In Southern California:
Activity fell 16.3 percent, to 4,086 notices, in Los Angeles County.
In Ventura County, it fell 23.2 percent, to 235 notices.
In Riverside County, activity fell 14.1 percent, to 1,143 notices.
In San Bernardino County, it fell 21.4 percent, to 1,296 notices, one of the state's steeper drops.
Karevoll also notes that there is "unremarkable activity" in other market-stress indicators, including loan-to-value ratios, seller financing and other unconventional financing, shifts in market mix, turnover rates and nonowner occupancy rates. That's been the trend for months.
Even though some owners financed home purchases in the sub-prime market, in which interests rates are slightly higher, the strong appreciation has not yet put those loans at risk of foreclosure, Karevoll also said.
The rate of appreciation would probably have to slow to about 12 percent annually for foreclosure activity to turn up. But even then the market would not be in trouble.
"You'd have to have about twice as many (default notices) as we do today before there would be a bad influence on the market," Karevoll said.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said the low foreclosure numbers are good news, and some surveys show that the county has been gaining jobs.
"All the indicators are looking better, and there is still strong demand in the housing market. If it keeps going, hopefully we won't see much of an uptick in foreclosures next year."
Mortgage broker draws prison term
The architect of a scheme that cheated lenders with bogus appraisals and straw buyers must repay $180,000
11/18/03
MARK LARABEE
A former home-mortgage broker who ripped off lenders through inflated appraisals and straw purchases was sentenced Monday to nearly three years in federal prison.
Ryan Frank Bonneau, 27, was the mastermind behind the complicated fraud in which homes were bought and sold quickly -- or "flipped" -- for a profit. He also profited from higher than normal loan fees.
The FBI believes the scheme involved as much as $20 million worth of home loans, with real losses totaling more than $1 million. The exact losses have not been calculated.
Bonneau appeared Monday in U.S. District Court in Portland, where Judge Garr King handed down the sentence based on a deal with federal prosecutors. Bonneau also must repay $180,000.
A grand jury indicted Bonneau and four others in November 2002, charging 28 counts of fraudulent activities and transactions. Bonneau pleaded guilty in July to wire fraud, engaging in money transactions derived from unlawful activity and bank fraud.
FBI agents, the U.S. Department of Housing and Urban Development and the Internal Revenue Service investigated the scheme.
Special Agent Jay Bienkowski, the FBI supervisor on the case, said Bonneau and his associates would buy a home, have a crooked appraiser inflate the price and often would sell it the same day.
They started with unsuspecting victims -- immigrants, the elderly and first-time buyers using government-backed loans -- and moved onto larger properties, each time "flipping" the property for a profit. On one transaction he made $200,000.
Bienkowski said most times Bonneau employed "straw buyers," people Bonneau had put up to the fraud. He'd alter loan papers giving the buyers fake identities or "improved" credit histories so the loans would get approved. Until the house fell into foreclosure, those buyers could live for free.
Karin Immergut, the U.S. attorney for Oregon, argued that Bonneau should get the maximum allowed under sentencing guidelines, and the judge complied. "By the time the defendant knew he was under investigation he was brash enough to still do significant land flips," she said.
And she said Bonneau was living the "high life," taking a trip to Hawaii, driving expensive cars and living on Portland's Street of Dreams. "He did all of this on other people's money," Immergut said.
A HUD official said the scheme was possible partly because lenders failed to do the required auditing of 10 percent of their loan packages. Among other things, lenders are required to verify property values and make sure buyers are who they say they are.
Asked by the judge if he had anything to say, Bonneau said things might not have gone so badly had he gotten better advice from his former attorney. The judge said he thought Bonneau had shown little remorse.
Misti Lynne Byrd, a former loan officer, also was sentenced Monday. She pleaded guilty in July to making false statements on loan applications. Judge King ordered her to serve a day in prison, five months of home detention and five years of supervision after her release.
Mack James Gentry pleaded guilty in August to one count of Housing and Urban Development fraud and also was sentenced Monday to six months of home detention, three years of supervision and $12,000 in restitution.
Todd Mikal Troen is awaiting sentencing on one count of wire fraud. Pauline Louise Gentry is awaiting trial on fraud charges. Mark Larabee: 503-294-7664; marklarabee@news.oregonian.com
The Associated Press
CHARLOTTE, N.C. (AP) - White-collar criminals using faked mortgage loan applications may have drained $50 million from banks and other lenders in North Carolina and left naive home buyers financially ruined, authorities say.
Mortgage brokers, appraisers, lawyers, builders and others are under the scrutiny of an FBI task force trying to stamp out the fraud. Federal investigators say they're examining as many as eight Charlotte groups they believe may have lied to lenders to get loans.
The schemes involve hundreds of home sales, at prices from less than $100,000 to more than $1 million.
"This is a target of opportunity for bad guys," said Mark Johnson, FBI white-collar crime unit supervisor for North Carolina. "Our caseload involving mortgage fraud has tripled in the last three years."
Mortgage fraud - lying on loan documents to deceive lenders - is a federal crime punishable by up to 30 years in prison and $1 million in fines.
The FBI says crooks usually pick a home on the market and negotiate a price. They recruit a buyer with good credit and promise a too-good-to-be-true investment, plus $5,000 or more up front.
They promise the buyer help allowing them to buy the house without spending a dime. Buyers are told the scammers will get the bank to loan 100 percent of the purchase price, then line up renters who will cover the mortgage payments.
The arrangement is supposed to end in a year or two with the scammers selling the house and splitting the profits.
Crimes are committed when the scammers exaggerate appraisals, income statements and other documents to deceive lenders into granting a loan for far more than the house is worth - and much more than their recruited buyer can afford, investigators said.
When the overblown loan is approved, the proceeds are divided. The seller gets his price. The scammers pocket the rest, sometimes more than $100,000.
The handpicked buyer gets the house, a few thousand dollars and a mortgage he can't afford.
If the house is leased, renters seldom pay enough to cover the mortgage. Soon the lender forecloses. The buyer's credit is ruined.
Sometimes an entire neighborhood plunges into turmoil as renters move in and lenders foreclose.
"It doesn't take many fraudulent sales to hurt a neighborhood," Assistant U.S. Attorney Mike Savage said. "The bank takes over ... and values are diminished."
Property flips - houses that sold twice on the same day for huge profits - can signal one of the simplest forms of mortgage fraud, the FBI said. Scammers buy a house at a low price, then sell it within hours or days to their handpicked buyer at a much higher price.
A flip can be legal and smart business. It's mortgage fraud when documents are falsified to get the loan.
The federal government looks at flips suspiciously when the second sale comes within six months because it's hard to generate a big profit in so short a time.
"Unless you sniff out a real deal - and that's rare - if a house is worth $100,000 today, next month it should be worth about $100,000," said Cindy Chandler, a real estate broker who teaches other agents how to detect mortgage fraud.
Investigators are focusing on cases involving two or more people working together to commit mortgage fraud.
U.S. Attorney Bob Conrad says his office "will vigorously prosecute mortgage fraud at all levels, including corrupt professionals whose integrity is key to safeguarding consumer lenders and investors."
One Charlotte bank, First Charter Corp., revealed this year that it had discovered $13 million in home loans with questionable appraisals and collateral. The bank notified regulatory officials and warned shareholders that more losses may be disclosed as its internal management investigation continues.
The bank, which has $4 billion in assets, warned of lower-than-expected earnings, in part because of the loans.
Information from: The Charlotte Observer
Tuesday November 04, 2003
by Seth Voorhees
Two brothers involved in the largest mortgage fraud scheme ever in western New York will both serve lengthy federal prison terms.
Robert Amico received 17 and 1/2 years in federal prison. Brother Richard got nine years.
The two were convicted in April, on federal charges stemming from a nearly 60 million dollar mortgage fraud scheme.
“We're obviously happy with the sentences,” said assistant U.S. attorney Richard Resnick. “The judge obviously considered all the evidence and facts that came out during the trial to impose what we believe is a fair sentence.”
Matthew Lembke, lawyer for Robert J. Amico, said he will appeal the sentence. At his sentencing Amico said he'd accept whatever the judge gave him.
“I think he was courageous up there, he was ready to accept sentence,” said Lembke of his client's pre-sentence speech. “We disagree with jury's verdict, and the court's findings, but we accept that.”
The Amico's father, Robert A. Amico, was also charged. His case ended in a mistrial, after the elder Amico became sick with cancer. He died last month.
AGRICULTURE
Cassava, rice mortgage schemes start
Post reporters
The Commerce Ministry is set to allocate more than five billion baht to mortgage cassava from planters to help alleviate exploitation by unscrupulous traders.
According to Commerce Minister Adisai Bodharamik, the ministry will start the cassava mortgage scheme in the middle of this month,with the mortgage price set at 1.05 baht per kilogramme for the first month.
The price would increase to 1.10 baht in December and 1.15 baht in January.
Planters could mortgage their crops at participating plants that would also process the cassava into tapioca flour to be kept at the government warehouses. They could redeem their crops any time within the three-month period in the form of flour if they saw a better price.
Currently, farmers sell their output at only 90 satang a kilo, despite the country's increase in tapioca exports of more than 20% to 22.4 billion baht in the first seven months of the year.
Exports of cassava are expected to generate more than 28 billion baht, a 20% rise over last year.
In related news, the ministry on Saturday began to mortgage nine million tonnes of paddy rice for the 2003-04 fiscal year to support domestic prices.
Mr Adisai said the annual rice mortgage programme would end on Feb 28.
Of the nine million tonnes, jasmine paddy would account for five million tonnes, glutinous paddy one million and rice paddy three million tonnes.
Mortgage prices will be based on quality, with the price for jasmine paddy with 15% moisture set at 6,700-7,000 baht a tonne. The price had been set at 4,760-5,330 baht a tonne for rice paddy with 15% moisture, and 5,650-5,900 baht for glutinous paddy with 15% moisture.
To curb any irregularities, the ministry will set a quota for each province based on its past output records.
Thailand's rice exports from Jan 1 to Oct 27 rose 15% year-on-year in to US$1.39 billion, though volumes rose only 0.3% to 5.86 million tonnes, according to the Foreign Trade Department.
It said Thai exporters obtained an average of $237 a tonne for rice this year, compared with $207 the year before.
Rachane Potjanasuntorn, the department's director-general, said rice shipments to Asia rose 18% to 1.89 million tonnes in the period while sales to the US rose nearly 70% to 421,913 tonnes.
Sentencing for the Amico brothers is set for Tuesday.
By Michael Zeigler
Staff Writer
(November 3, 2003) — With the sentencings of brothers Robert J. Amico and Richard N. Amico on Tuesday, the largest case of mortgage fraud ever prosecuted in western New York will draw nearly to a close.
Only one other figure in the conspiracy — a mortgage loan officer who pleaded guilty and gave critical aid to prosecutors — will remain to be sentenced.
But what has the residential mortgage industry learned from the scheme, which caused lenders to grant $60 million in fraudulent loans on houses in Monroe, Ontario and Wayne counties over a seven-year period?
If nothing else, the complicated plot illustrated the vulnerability of lenders to a well-thought-out plan that placed co-conspirators in virtually every part of the mortgage process — from inception to closing.
But could it have been prevented?
“Not really,” said Nancy Gascoyne, an Erie County mortgage broker who is past president of the New York State Association of Mortgage Brokers, a voluntary trade organization that represents brokers.
“You had a scam here that was so pervasive that it's no wonder it took so long to detect it,” she said. “It was such a massive scheme and it was so well planned out.”
The Amicos, who built suburban Rochester houses with their father, Robert A. Amico, were convicted after a four-month trial in U.S. District Court that ended in April.
Robert J. Amico, 40, who has a previous felony conviction for securities fraud, was found guilty of the most serious charges. Probation officials have recommended a prison sentence of up to 20 years for him and up to 10 years for Richard, 32.
Robert A. Amico, 63, also was charged, but his case ended in a mistrial when he had surgery to remove a cancerous kidney. His charges were put on hold while he received treatment, but he died three weeks ago.
Beginning in 1994, the Amicos ran a fraud conspiracy that was “breathtaking in its scope,” prosecutors said.
Enlisting the aid of mortgage brokers and their employees, an accountant, an appraiser and two lawyers, the Amicos obtained home mortgages far above the true value of houses — not only for buyers of the houses but for themselves — by submitting bogus information on loan applications that overstated the value of the houses and the worth of their buyers.
A wide-ranging scam
Robert A. Amico started the scheme modestly, by finding buyers who couldn't afford the high-end houses he was building and promising them a house with no money down and a “rebate” check at the closing that would help them pay their mortgage costs, prosecutors said.
Amico overstated the value of houses and claimed phony down payments by borrowers to obtain mortgages that amounted to 100 percent of the houses' real value, prosecutors said.
“The scheme wasn't to get him more money. It helped him sell houses quicker because it helped him find people who didn't have money for down payments,” said Assistant U.S. Attorney Richard A. Resnick, who prosecuted the Amicos and 16 other people who pleaded guilty and cooperated.
But greed reared its head by 1997, when Robert J. Amico joined the plot, prosecutors said. Within a year, the Amicos were obtaining mortgages that in some cases were nearly double the houses' actual values.
Although the Amicos knew many of their houses were sold to unqualified buyers who couldn't afford them and would eventually be forced into foreclosure, they believed lenders wouldn't be suspicious if buyers made payments for at least two years before defaulting, the prosecution said. So the Amicos created a “slush fund” from the sale of every house that would help buyers temporarily make payments.
Co-conspirator Patrick J. McNamara, a mortgage loan officer, agreed to manage the properties and quietly let them slide into foreclosure one by one.
But the plan fell apart in 2000 when the Democrat and Chronicle published a series of stories disclosing that federal investigators were looking into a case of mortgage fraud by the Amicos.
“The newspaper stories were really one of the major reasons the thing was taken down,” Resnick said. “The construction funds dried up and they couldn't finish the houses they started. It's like any pyramid scheme; if you don't have money coming in, it eventually falls apart.”
Although the plot was wide-ranging, the glue that held the conspiracy together was the participation of mortgage brokers and their loan officers.
“Any borrower can go ahead and commit this kind of fraud by creating false documents,” Resnick said. “But to have a crime committed on a grand scale like this, you have to have the mortgage brokers in on it. And as long as they're in on it, it can happen again like it did with the Amicos.”
Skirting the system
That's uneasy news for leaders of mortgage brokers' associations, who have lobbied unsuccessfully for state and national legislation that would increase regulation of brokers and make crooked colleagues easier to catch.
Mortgage brokers are independent real estate professionals who help home buyers find the best mortgage terms by shopping around with various lenders. About two-thirds of residential mortgages are handled by mortgage brokers, according to industry statistics.
Although New York requires mortgage brokers to be licensed and undergo a criminal background check, brokers can hire virtually anyone to process loans for them. And therein lies part of the success of the Amico scheme.
McNamara was fired by three mortgage brokerages for fudging information on loan applications. Then he went to work for the Amicos, where he engaged in wholesale fraud by concocting information that tricked lenders into granting mortgages.
Robert A. Amico also worked as a loan officer for an Albany lender, helping land loans on houses he built by disguising his involvement in the sales.
“On an Amico loan, everything was falsified,” McNamara testified. But the deception was hard to detect because loan officers like McNamara and Robert A. Amico could work with virtually no oversight.
“Loan officers are not licensed. They are not certified. They are not even registered with the state,” Gascoyne said. “There is no accountability. If they do something wrong, they leave.
“If you become a broker, you can go out and hire a Joe Blow off the street; any grass cutter, any check-out clerk, anyone with no practical experience, and they work under your license.”
The New York State Association of Mortgage Brokers has lobbied the state Legislature to enact a model statute that would regulate brokers more tightly and require the licensing of loan officers. But the Legislature, fearing the creation of more bureaucracy and added costs to home buyers, has declined.
The same is true nationally. The National Association of Mortgage Brokers has been unable to persuade Congress to create a national registry of brokers and loan officers that would include requirements for continuing education and background checks.
“We want the bad operators out, too,” said Joe Falk, past president of the association.
Unless a change is made, he said, the onus is on consumers to protect themselves.
“Take time to read the documents,” he said. “If you can't read them or you're confused, ask the provider questions. If they can't answer them in a form you understand, flee! Run! Get away as fast as you can!”
WASHINGTON, D.C. (November 5, 2003)—
The Mortgage Bankers Association's (MBA) chairman, Robert M. Couch, CMB, testified today before the Financial Services Committee of the U.S. House of Representatives on the four elements essential to solving abusive lending practices in the mortgage industry: consumer education, simplification of the mortgage process, vigorous enforcement of current laws and, most importantly, nationwide uniformity of laws and regulations.
"MBA would like to reiterate our ongoing commitment to eliminating abusive lending practices in the mortgage industry," stated Couch. "These practices seriously undermine the excellent work being done by reputable lenders to provide mortgage loans to those wishing to fulfill the dream of owning a home. This issue is of high importance and we strongly believe that MBA's four-pronged approach to solving this problem will be of mutual benefit to consumers and the mortgage industry."
The first element to solving the issue of abusive lending is the education of consumers during the mortgage process. MBA's consumer education program called, "Stop Mortgage Fraud" is one example of the education process. The program, available both in English and Spanish provides useful guidance to consumers about how they can combat potentially abusive loan practices by providing a Borrower's Bill of Rights, Ten Warning Signs of Abusive Lending, and information on how to report suspected unethical lenders.
The second step is enforcement of existing laws. MBA has been proactive in the process of exploring the necessary steps to ensure that federal and state authorities are properly equipped to adequately enforce existing laws. In June 2003, MBA hosted an Enforcement Summit in Washington, DC, that was attended by federal policymakers, consumer groups, key federal and state regulators and real estate finance industry representatives. The Summit represented the beginning of meaningful communications with all groups interested in resolving problems and issues surrounding abusive mortgage lending. MBA will release a report soon, summarizing the key discussions and findings of the Enforcement Summit.
The third step in doing away with abusive lending understands that no regulatory approach will deliver true consumer protection without comprehensive reform and simplification of the mortgage [lending] process.
Lastly, MBA is working to establish a uniform national standard to combat unethical lending practices.
By a vote of 392-30, the House of Representatives today approved landmark legislation to give consumers new tools to fight the rapidly growing crime of identity theft. According to an FTC study released last week, nearly 10 million Americans were victimized by identity thieves last year, costing consumers and businesses over $50 billion.
H.R. 2622, the Fair and Accurate Credit Transactions Act, sponsored by House Financial Institutions Chairman Spencer Bachus (AL), Rep. Darlene Hooley (OR), Rep. Judy Biggert (IL), and Rep. Dennis Moore (KS), boasts such consumer friendly provisions as free access to credit reports and a new fraud alert system to give consumers greater protection from identity thieves.
“Consumers rely on affordable access to credit,” House Financial Services Committee Chairman Michael G. Oxley (OH) said. “When identity thieves strike, they take away that access and ruin the lives of their victims. This bill will give those victims the ability to clear their names and realize the dreams they have for their families.”
“This bill has great consumer protections so we can reduce the number of identity theft victims and make it easier for those who've been victimized to restore their credit,” Rep. Steve LaTourette (OH) said.
“For far too long, identify thieves have had the upper hand and managed to stay one step ahead of consumers, credit card companies and even law enforcement,” LaTourette said. “This bill will strip identity thieves of their arsenal of dirty tricks.”
The legislation creates powerful consumer protection tools, including:
It imposes meaningful new obligations on financial institutions to prevent identity theft and to ensure accuracy, including:
The House adopted three amendments to the legislation, including:
Source: House Financial Services Committee
