Fraud forgery and scams powerpoint


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This is who investigates fraud and violations concerning real estate and mortgage in Utah. This course describes the rules and what happens to people who violate the rules set forth by the CFPB. It also includes good information for realtors in Utah so they can better protect their clients.

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Fraud forgery and scams powerpoint

  1. 1. How to recognize and avoid trouble
  2. 2. About Mike Lasater Licensed loan officer with over 10 years of experience Committed to the financial well being of our clients
  3. 3. Course Objectives  My Goals:  Inform you of recent fraudulent activities and discuss ways to protect yourselves and your clients  Present to you the latest landmark case of fraud and explain how it came to the attention of the CFPB  Demonstrate how to take advantage of CFPB policies and use them for the benefit of your clients  Create awareness of the proper way for lenders to follow CFPB guidelines – How lenders get paid
  4. 4. Fraud /frôd/  Noun: Wrongful or criminal deception intended to result in financial or personal gain.  A person or thing intended to deceive others, typically by unjustifiably claiming or being credited with accomplishments or qualities.  Synonyms: cheat - deceit - deception - swindle - humbug – fake
  5. 5. Consequences of fraud  Consumers suffer  Impact on our industries  Impact on our economy  Individual consequences  Negative impact on our community
  6. 6. Who investigates fraudulent activity in our industry?  CFPB (enforces RESPA)  Utah Department of Commerce  Division of Real Estate  FBI  FTC  Prudential Regulators
  7. 7. Fraud and Discrimination  Regulated and enforced by  CFPB  FTC  HUD  DOJ  Division of Real Estate
  8. 8. Barney Frank and Chris Dodd  Financial Services Committee Chairman  Senate Banking Committee Chairman
  9. 9. The Loan Originator Compensation Rule Took effect April 1st 2011
  10. 10. THE CFPB  Enforces ECOA/Reg B  Committed to fighting unlawful, discriminatory and fraudulent practices and creating a fair marketplace for all consumers  Creditors: ““…a person who, in the ordinary course of business, regularly participates in the decision of whether or not to extend credit” (12 C.F.R. §1002.2(l)). For the purposes of ECOA’s prohibitions against discrimination and discouragement, the definition of creditor also includes “ …a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers to select creditors to whom requests for credit may be made” (12 C.F.R. §1002.2(l)).
  11. 11. CFPB and Prudential Regulators in accordance with the FTC  Depository Institutions with more than 10 billion dollars in assets are primarily regulated by the CFPB  Depository entities with less than 10 billion in assets are under regulation by the Prudential Regulators, however they ultimately report to the CFPB  The FTC used to function as the primary federal regulator for non-depository institutions but has been somewhat replaced by the CFPB. They now operate in coordination with them.
  12. 12. From violation to punishment  Violation is committed by one or more creditors  Reported to the BOR or Division of Real Estate or The Utah Department of Commerce  Escalated to CFPB, FTC or Prudential Regulators  Investigated and found to be discriminatory  Referred to the Assistant Secretary of HUD  Conciliation agreement signed by Carol Galante  Referred to the DOJ  Referred to the Attorney General  (12 C.F.R. §1002.16(b)(3)).
  13. 13. HUD Assistant Secretary  Carol Galante
  14. 14. Richard Cordray – CFPB Director
  15. 15. The Wrong Way for a Builder to Profit From Residential Mortgages By Paul Taylor
  16. 16. Chapter 1  Kickbacks for referrals violate RESPA
  17. 17. Overview  Home builder wants to profit from mortgages  Home builder makes false mortgage company  Receives referral fees through false company
  18. 18. Paul Taylor Homes – Texas  Created false mortgage companies: Stratford Mortgage Services and PTH Mortgage  Benchmark Bank and Willow Bend Mortgage actually performed the lender function  Taylor receives payment through a “service agreement”  FDIC becomes aware of the illegal activity  Refers the case to the CFPB
  19. 19.  Referral fees violate RESPA  CFPB enforces RESPA  Home builder is fined $118,194.20 – his total kickback  Fine goes to the United States Treasury because it was found that consumers were not harmed by this practice
  20. 20.  CFPB: “Harm caused by kickbacks hurt Competition, causes consumers to potentially pay higher price at settlement
  21. 21. Richard Cordray CFPB Director • “The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.”
  22. 22. How Loan Officers Get Paid How to Read a Ratesheet
  23. 23. The purpose of LOCR is: • To prevent incentives to “up-charge” consumers on their loans. The final rule generally prohibits loan originator compensation based upon the profitability of a transaction or a pool of transactions.
  24. 24. The proposal was designed to facilitate consumer shopping, enhance consumer decision-making, and preserve consumer choice and access to credit.
  25. 25. Where compensation is set?  Keep rates low to stay competitive  What to do with overage  When is it beneficial to pay points  Offering a lender credit
  26. 26. Utah based mortgage company is the target in first CFPB investigation on record
  27. 27. L.O.C.R  Loan Originator Compensation Rule: April 6 2011  Prohibits mortgage companies from motivating employees to steer borrowers into more expensive mortgages  Requires companies to properly retain compensation records  Transferred to CFPB on July 21, 2011  Why would a company participate in an illegal practice?  Market conditions when agreements were put in place
  28. 28. Mortgage Companies React  Point Banks  Profitability accounts (LOP)  Overage accounts  Marketing accounts  Bonus and Incentive accounts
  29. 29. Recent Violation and Action  1100 bonuses paid to 215 loan officers  9400 borrowers who received a loan from any officer who received a bonus will receive a check  Total amount paid to borrowers: $9,232,896.00  Additional $4,000,000 in civil penalties and fines  Referred to CFPB by investigators with the Utah Department of Commerce  Working in accordance with the Division of Real Estate
  30. 30. When did this all take place?  Dodd-Frank Wall Street Reform and Consumer Protection Act – July 21, 2010  January 2011 – Mortgage companies are put on notice of the new rules and given time to comply  Loan Officer Compensation Rule effective April 6th 2011  QM takes effect January 10, 2014  Safe Harbor  Qualified Mortgage rules
  31. 31. 10 minute Break
  32. 32. Double contracts  What does that mean?: executing two or more purchase agreements, one of which is not made known to the prospective lender or loan funding entity.  Can a last minute “fix” be considered a double contract?  Any repair or alteration in the contract must be completed prior to signing  Seller Concessions – Money left on the table  Carpet/Paint allowances  Escrow for repairs 1 ½ times bid amount held in escrow
  33. 33. Really!!??
  34. 34. Art Intellect – Salt Lake City  Patrick Merrill Brody and Laura A. Roser  Mason Hill and Virtual MG  Took 2.5 million from 75 investors  Promised returns of 30%  Offered to purchase distressed property, rehabilitate and find tenants  Money went to operating expenses, commissions and lavish personal items i.e. Rare books, trips, houses, cruises, personal cook, Cadillac Escalade for the defense atty.  Some investor money went to initial investors as repayment (Ponzi scheme?)
  35. 35. Online scams targeting renters  Agent Identity Theft – Fraudster finds a listing in the classifieds represented by an agent. Fraudster steals agent identity and sets up phony phone and email address and re-lists the property elsewhere at a reduced price. Fraudster has potential renter drive by and look in windows to make sure the home is acceptable and then asks for money to be wired.
  36. 36.  Good rental – Great price: Landlord is out of town and asks for the money to be wired somewhere far away
  37. 37.  Find a house, sign a lease and give the lock smith first month rent and security deposit
  38. 38. Scam email red flags  There are commonalities with all rental scam emails. Below are some tips when dissecting a rental scam email.  Does the email start out with Sir / Madam?  Are there misspellings in the email?  Are there character mistakes in the email? i.e Hello,my nameis Susie.  Is there excessive capitalization?  Does the email reference God, UK, Cashiers Check, Doctor, Nigeria, Reverend, etc.  Is the email from a free email provider. i.e gmail, yahoo, aol, hotmail.  Does the email refer to another person or agent?  Does the email reference wanting to move in site unseen?  From
  39. 39. Wired funds are being stolen!! Notify borrowers of potential new scam Urgent warning: Customer’s wired funds are being stolen! GuaranteedRate isaware of a new email scamtargetingborrowerswiringmoneytotitle companies. We have receivedmultiple industryreportsof borrowerswhohave received “doctored”emails,claimingtobe from title companies. Thieveshave interceptedemail communicationsandare changingwiringinstructionstodivertfundstoa fraudulentaccount. This scam or wire interceptionistargeting attorneys and title companies,and the “cash to This issue is not on the lenderside,and has notclose” componentof the transaction. impactedany GuaranteedRate borrowers at this time. In order to prepare our company, we ask that you followthe best practice of instructingall borrowers to call theirclosing agent confirmingwire instructionsbefore initiatingfunds.
  40. 40. Other common schemes and scams  House theft  Affinity fraud  Reverse mortgage fraud
  41. 41. Conclusion  How to detect if there is foul play  How to avoid being caught up in something that could end in trouble.  How to advise our clients  Stick to your training and trust your instincts
  42. 42. Conclusion