BY MORTGAGEORB.COM ON TUESDAY 05 OCTOBER 2010
Pasadena, Calif.-based OneWest Bank FSB has implemented the Principal Reduction Alternative (PRA) loan modification program as outlined under the Home Affordable Modification Program (HAMP). With this announcement, OneWest becomes one of the first servicers to launch the program.
"We are pleased to now offer principal reduction as yet another solution to help more borrowers stay in their homes," says Steven Mnuchin, OneWest Bank's chairman. "OneWest continues to be extremely supportive of both the [Federal Deposit Insurance Corp.'s] and the Treasury’s leadership in the loan modification arena and appreciates the opportunity to be an early adopter of this important program."
During the initial launch of the PRA program, OneWest Bank will consider eligible loans that are 60+ days delinquent and owned by OneWest Bank or serviced as part of an investor pool that has given OneWest the authority to implement HAMP. Qualifying loans must have a loan-to-value ratio in excess of 115%, and the home must be owner-occupied.
Under the program, principal will be forgiven over a three-year period in three equal installments. The amount of the reduction will initially be treated as a principal forbearance and will be non-interest-bearing.
SOURCE: OneWest Bank FSB
Tuesday, October 5, 2010
GSEs Tell Servicers to Review Foreclosure Legal Procedures
American Banker
Tuesday, October 5, 2010
By Kate Berry
Fannie Mae and Freddie Mac have told mortgage servicers to immediately review their policies and procedures related to the execution of affidavits, verifications and other legal documents in the foreclosure process.
Responding to reports that at least three mortgage servicers — Ally Financial Inc.'s GMAC Mortgage, JPMorgan Chase & Co. and Bank of America Corp. — were delaying foreclosures while investigating potential defects in the processing of court documents, the government-sponsored enterprises said late Friday that servicers needed to take action to strengthen their review and due diligence processes. Freddie set an Oct. 18 deadline for servicers to conduct reviews.
"Freddie Mac is deeply concerned about recent reports that there may be affidavits that were improperly executed in connection with foreclosures," Bruce Witherell, Freddie's chief operating officer, said in a statement. "The alleged practices in these reports are clearly not in compliance with Freddie Mac's guidelines and directives to servicers."
The servicers have acknowledged that some employees signed affidavits without having personal knowledge of the information.
Fannie said in its letter to servicers that they must have sufficient and properly trained staff, adequate controls and quality-assurance procedures in place. In addition, Fannie said servicers must contact its legal counsel if any routine legal proceeding becomes contested, or if the servicer receives a notice of a non-routine action that involves a Fannie-owned or securitized mortgage loan that would affect Fannie's interests.
Both GSEs said they can pursue a varity of remedies against servicers who do not comply, including requiring corrective action, charging compensatory fees, requiring that the lender indemnify them for losses, or terminating a servicer's contract for a failure "to take diligent action consistent with applicable law."
Tuesday, October 5, 2010
By Kate Berry
Fannie Mae and Freddie Mac have told mortgage servicers to immediately review their policies and procedures related to the execution of affidavits, verifications and other legal documents in the foreclosure process.
Responding to reports that at least three mortgage servicers — Ally Financial Inc.'s GMAC Mortgage, JPMorgan Chase & Co. and Bank of America Corp. — were delaying foreclosures while investigating potential defects in the processing of court documents, the government-sponsored enterprises said late Friday that servicers needed to take action to strengthen their review and due diligence processes. Freddie set an Oct. 18 deadline for servicers to conduct reviews.
"Freddie Mac is deeply concerned about recent reports that there may be affidavits that were improperly executed in connection with foreclosures," Bruce Witherell, Freddie's chief operating officer, said in a statement. "The alleged practices in these reports are clearly not in compliance with Freddie Mac's guidelines and directives to servicers."
The servicers have acknowledged that some employees signed affidavits without having personal knowledge of the information.
Fannie said in its letter to servicers that they must have sufficient and properly trained staff, adequate controls and quality-assurance procedures in place. In addition, Fannie said servicers must contact its legal counsel if any routine legal proceeding becomes contested, or if the servicer receives a notice of a non-routine action that involves a Fannie-owned or securitized mortgage loan that would affect Fannie's interests.
Both GSEs said they can pursue a varity of remedies against servicers who do not comply, including requiring corrective action, charging compensatory fees, requiring that the lender indemnify them for losses, or terminating a servicer's contract for a failure "to take diligent action consistent with applicable law."
Monday, October 4, 2010
Study Finds Race a Factor in Foreclosure Process
http://nationalmortgageprofessional.com/news20872/study-finds-race-factor-foreclosure-process
Mon, 2010-10-04 09:46 — NationalMortgage
Although the rise in sub-prime lending and the ensuing wave of foreclosures was partly a result of market forces that have been well-documented, the foreclosure crisis was also a highly racialized process, according to a study by two Woodrow Wilson School scholars published in the October 2010 issue of the American Sociological Review.
Woodrow Wilson School Ph.D. candidate Jacob Rugh and Woodrow Wilson School's Henry G. Bryant, professor of sociology and public affairs; and Douglas Massey, assessed segregation and the American foreclosure crisis. The authors argue that residential segregation created a unique niche of minority clients who were differentially marketed risky sub-prime loans that were in great demand for use in mortgage-backed securities (MBS) that could be sold on secondary markets.
The authors use data from the 100 largest U.S. metropolitan areas to test their argument. Findings show that black segregation, and to a lesser extent Hispanic segregation, are powerful predictors of the number and rate of foreclosures in the United States—even after removing the effects of a variety of other market conditions such as average creditworthiness, the degree of zoning regulation, coverage under the Community Reinvestment Act (CRA), and the overall rate of sub-prime lending.
"This study is critical to our understanding of the foreclosure crisis since it shows the important and independent role that racial segregation played in the housing bust," said Rugh.
A special statistical analysis provided strong evidence that the effect of black segregation on foreclosures is causal and not simply a correlation.
"While policy makers understand that the housing crisis affected minorities much more than others, they are quick to attribute this outcome to the personal failures of those losing their homes—poor credit and weaker economic position," noted Massey. "In fact, something more profound was taking place; institutional racism played a big part in this crisis."
The authors conclude that Hispanic and black racial segregation was a key contributing cause of the foreclosure crisis. "This outcome was not simply a result of neutral market forces but was structured on the basis of race and ethnicity through the social fact of residential segregation," the authors note in the article. "Ultimately, the racialization of America's foreclosure crisis occurred because of a systematic failure to enforce basic civil rights laws in the United States," the authors write in the article. "In addition to tighter regulation of lending, rating, and securitization practices, greater civil rights enforcement has an important role to play in cleaning up U.S. markets. It is in the nation's interest for federal authorities to take stronger and more energetic steps to rid U.S. real estate and lending markets of discrimination, not simply to promote a more integrated and just society but to avoid future catastrophic financial losses."
For more information, visit www.asanet.org.
Mon, 2010-10-04 09:46 — NationalMortgage
Although the rise in sub-prime lending and the ensuing wave of foreclosures was partly a result of market forces that have been well-documented, the foreclosure crisis was also a highly racialized process, according to a study by two Woodrow Wilson School scholars published in the October 2010 issue of the American Sociological Review.
Woodrow Wilson School Ph.D. candidate Jacob Rugh and Woodrow Wilson School's Henry G. Bryant, professor of sociology and public affairs; and Douglas Massey, assessed segregation and the American foreclosure crisis. The authors argue that residential segregation created a unique niche of minority clients who were differentially marketed risky sub-prime loans that were in great demand for use in mortgage-backed securities (MBS) that could be sold on secondary markets.
The authors use data from the 100 largest U.S. metropolitan areas to test their argument. Findings show that black segregation, and to a lesser extent Hispanic segregation, are powerful predictors of the number and rate of foreclosures in the United States—even after removing the effects of a variety of other market conditions such as average creditworthiness, the degree of zoning regulation, coverage under the Community Reinvestment Act (CRA), and the overall rate of sub-prime lending.
"This study is critical to our understanding of the foreclosure crisis since it shows the important and independent role that racial segregation played in the housing bust," said Rugh.
A special statistical analysis provided strong evidence that the effect of black segregation on foreclosures is causal and not simply a correlation.
"While policy makers understand that the housing crisis affected minorities much more than others, they are quick to attribute this outcome to the personal failures of those losing their homes—poor credit and weaker economic position," noted Massey. "In fact, something more profound was taking place; institutional racism played a big part in this crisis."
The authors conclude that Hispanic and black racial segregation was a key contributing cause of the foreclosure crisis. "This outcome was not simply a result of neutral market forces but was structured on the basis of race and ethnicity through the social fact of residential segregation," the authors note in the article. "Ultimately, the racialization of America's foreclosure crisis occurred because of a systematic failure to enforce basic civil rights laws in the United States," the authors write in the article. "In addition to tighter regulation of lending, rating, and securitization practices, greater civil rights enforcement has an important role to play in cleaning up U.S. markets. It is in the nation's interest for federal authorities to take stronger and more energetic steps to rid U.S. real estate and lending markets of discrimination, not simply to promote a more integrated and just society but to avoid future catastrophic financial losses."
For more information, visit www.asanet.org.
Saturday, October 2, 2010
Count on Sequels to TARP
By GRETCHEN MORGENSON
Published: October 2, 2010
THE government is pulling a sheet over TARP, the Troubled Asset Relief Program created during the panic of 2008 to bail out the nation’s financial institutions. With the program’s expiration on Sunday, we can expect to hear lots of claims from the folks at the Treasury that it was a great success.
Such assertions would be no surprise from a political class justifiably concerned about possible taxpayer unhappiness, the continuing economic turmoil and the midterm elections. But if we have learned anything during this crisis, it is that the proclamations emanating from the Washington spin machine must be taken with an extra-hefty grain of salt.
Consider the claims made last summer that the Dodd-Frank financial reform act reduces the threats that large, interconnected banks pose to taxpayers and the economy when the banks are deemed too big to fail. Indeed, as regulators hammer out the rules governing derivatives transactions, it’s evident that the law has created a new set of institutions that will almost certainly be deemed too important to fail if they ever get into trouble. And that means there won’t really be an effective way to keep those firms from taking big, profitable, short-term risks that are dumped on the taxpayers when the bets fail.
Our roster of bailout candidates includes the clearinghouses, created under Dodd-Frank, that are meant to increase the oversight of derivatives trading. Because most derivatives transactions are expected to go through these clearinghouses, they will be “systemically important” under the law. As such, Dodd-Frank specifically provides that “in unusual or exigent circumstances,” the Federal Reserve may provide such entities with a financial backstop, including borrowing privileges.
Remember this: Financial backstop is just another term for a taxpayer bailout. And the major banks and brokerage firms are the members of the clearinghouses, so a backstop would essentially be for them.
According to the Bank for International Settlements, the entire derivatives market had a gross credit exposure of $3.5 trillion at the end of 2009. Obviously, even a small fraction of that amount could represent a sizable call on the taxpayers if a clearinghouse hit the skids.
So much for eradicating too-big-to-fail.
That’s not to say there aren’t upsides to clearinghouses. First and foremost, they will improve transparency in this huge market, requiring participants to disclose how much they have at stake financially. Regulators didn’t have such reports in the recent crisis and were severely hampered by the fact that derivatives trading existed largely in a black box.
In times of trouble, clearinghouses also allow hobbled firms to unwind and quickly reassign their positions to other, healthier players. Another good thing.
But clearinghouses sometimes collapse, as Craig Pirrong, professor of finance at the University of Houston, points out.
“Clearinghouses are intimately connected with the financial system and overall banking system, so the idea that clearinghouses reduce the interconnectedness of the financial system is incorrect,” he said. “They are big, interconnected and they can fail when we have big market shocks.”
In the Gold Panic of 1869, which caused New York markets to seize up, the clearinghouse for the gold exchange failed. And in the 1987 stock market crash, members of the Chicago Mercantile Exchange, the Chicago Board of Trade and the Options Clearing Corporation received emergency infusions, Mr. Pirrong said.
“It’s a dilemma,” he added. “On the one hand, it is very important that clearinghouses have the ability to get liquidity support in the time of a crisis. But if a clearinghouse is convinced that Ben is at my back, they might not be as prudent or cautious as they might otherwise be” — referring to Ben S. Bernanke, the Fed chief.
Walker F. Todd, a lawyer and economic consultant in Chagrin Falls, Ohio, was assistant general counsel and research officer at the Federal Reserve Bank of Cleveland from 1985 to 1994. He’s also an expert on the widening financial safety net — a net that offers taxpayer backstops for the institutions that got us into this mess and will most likely, alas, get us into the next one.
He says he is disturbed by the explicit backing of derivatives clearinghouses provided in Dodd-Frank. “There is no reason whatsoever for exposing taxpayers and ordinary citizens to paying for the gaming losses incurred through over-the-counter derivatives,” Mr. Todd said.
But with the backstop now firmly in place for clearinghouses, the Fed will be able to pay off derivatives players directly, rather than indirectly as it did in the disastrous rescue of the American International Group.
Given the multiple bailouts of 2008, it is to be expected that the line of institutions clamoring to join the cannot-fail party will grow longer. That’s the definition of moral hazard — if you rescue one group, others are sure to want the same treatment and behave in a way that ensures they’ll get it. The losses that taxpayers may endure in the next debacle, meanwhile, mount higher.
“THE crisis is about loss redistribution,” said Edward J. Kane, professor of finance at Boston College and an authority on regulatory failures. “In a crisis, these institutions have much more power with the government than taxpayers do and they will make it seem in the interests of responsible officials to rescue them, whether that’s Congress, the Treasury or the Federal Reserve. But the notion that you can always throw these losses on the taxpayer in the long run is very, very dangerous. There will come a time when the taxpayers will come close to revolt.”
Published: October 2, 2010
THE government is pulling a sheet over TARP, the Troubled Asset Relief Program created during the panic of 2008 to bail out the nation’s financial institutions. With the program’s expiration on Sunday, we can expect to hear lots of claims from the folks at the Treasury that it was a great success.
Such assertions would be no surprise from a political class justifiably concerned about possible taxpayer unhappiness, the continuing economic turmoil and the midterm elections. But if we have learned anything during this crisis, it is that the proclamations emanating from the Washington spin machine must be taken with an extra-hefty grain of salt.
Consider the claims made last summer that the Dodd-Frank financial reform act reduces the threats that large, interconnected banks pose to taxpayers and the economy when the banks are deemed too big to fail. Indeed, as regulators hammer out the rules governing derivatives transactions, it’s evident that the law has created a new set of institutions that will almost certainly be deemed too important to fail if they ever get into trouble. And that means there won’t really be an effective way to keep those firms from taking big, profitable, short-term risks that are dumped on the taxpayers when the bets fail.
Our roster of bailout candidates includes the clearinghouses, created under Dodd-Frank, that are meant to increase the oversight of derivatives trading. Because most derivatives transactions are expected to go through these clearinghouses, they will be “systemically important” under the law. As such, Dodd-Frank specifically provides that “in unusual or exigent circumstances,” the Federal Reserve may provide such entities with a financial backstop, including borrowing privileges.
Remember this: Financial backstop is just another term for a taxpayer bailout. And the major banks and brokerage firms are the members of the clearinghouses, so a backstop would essentially be for them.
According to the Bank for International Settlements, the entire derivatives market had a gross credit exposure of $3.5 trillion at the end of 2009. Obviously, even a small fraction of that amount could represent a sizable call on the taxpayers if a clearinghouse hit the skids.
So much for eradicating too-big-to-fail.
That’s not to say there aren’t upsides to clearinghouses. First and foremost, they will improve transparency in this huge market, requiring participants to disclose how much they have at stake financially. Regulators didn’t have such reports in the recent crisis and were severely hampered by the fact that derivatives trading existed largely in a black box.
In times of trouble, clearinghouses also allow hobbled firms to unwind and quickly reassign their positions to other, healthier players. Another good thing.
But clearinghouses sometimes collapse, as Craig Pirrong, professor of finance at the University of Houston, points out.
“Clearinghouses are intimately connected with the financial system and overall banking system, so the idea that clearinghouses reduce the interconnectedness of the financial system is incorrect,” he said. “They are big, interconnected and they can fail when we have big market shocks.”
In the Gold Panic of 1869, which caused New York markets to seize up, the clearinghouse for the gold exchange failed. And in the 1987 stock market crash, members of the Chicago Mercantile Exchange, the Chicago Board of Trade and the Options Clearing Corporation received emergency infusions, Mr. Pirrong said.
“It’s a dilemma,” he added. “On the one hand, it is very important that clearinghouses have the ability to get liquidity support in the time of a crisis. But if a clearinghouse is convinced that Ben is at my back, they might not be as prudent or cautious as they might otherwise be” — referring to Ben S. Bernanke, the Fed chief.
Walker F. Todd, a lawyer and economic consultant in Chagrin Falls, Ohio, was assistant general counsel and research officer at the Federal Reserve Bank of Cleveland from 1985 to 1994. He’s also an expert on the widening financial safety net — a net that offers taxpayer backstops for the institutions that got us into this mess and will most likely, alas, get us into the next one.
He says he is disturbed by the explicit backing of derivatives clearinghouses provided in Dodd-Frank. “There is no reason whatsoever for exposing taxpayers and ordinary citizens to paying for the gaming losses incurred through over-the-counter derivatives,” Mr. Todd said.
But with the backstop now firmly in place for clearinghouses, the Fed will be able to pay off derivatives players directly, rather than indirectly as it did in the disastrous rescue of the American International Group.
Given the multiple bailouts of 2008, it is to be expected that the line of institutions clamoring to join the cannot-fail party will grow longer. That’s the definition of moral hazard — if you rescue one group, others are sure to want the same treatment and behave in a way that ensures they’ll get it. The losses that taxpayers may endure in the next debacle, meanwhile, mount higher.
“THE crisis is about loss redistribution,” said Edward J. Kane, professor of finance at Boston College and an authority on regulatory failures. “In a crisis, these institutions have much more power with the government than taxpayers do and they will make it seem in the interests of responsible officials to rescue them, whether that’s Congress, the Treasury or the Federal Reserve. But the notion that you can always throw these losses on the taxpayer in the long run is very, very dangerous. There will come a time when the taxpayers will come close to revolt.”
Old Republic to stop writing policies for some foreclosures
By Stephanie Armour, USA TODAY
http://www.usatoday.com/money/economy/housing/2010-10-02-old-republic-foreclosures_N.htm
Old Republic National Title Insurance, among the nation's largest title insurance companies, will no longer write new policies for homes foreclosed upon by J.P. Morgan Chase and Ally Financial's GMAC Mortgage unit –– a sign that concerns about faulty foreclosure paperwork could now endanger new sales of foreclosed homes.
Old Republic issued a bulletin to some agents stating that "the company will not insure title to any property which has been foreclosed by Ally Financial, Ally Bank or GMAC until further notice," according to a Sept. 29 copy of the memo. The concern is that other title companies will also refuse to issue policies for major lenders, which could have major ramifications for the housing industry.
And Maryln Weiner, a title agent and real estate lawyer in Boca Raton, Fla., said she received a bulletin saying that Old Republic would also not insure title policy to a purchaser who has bought a property from Chase when the bank has foreclosed on the home and are now selling it to third parties.
"They won't insure it after completion after the foreclosure," Weiner says. "This is going to set us back years. It's really going to be a mess. I think you're going to see actions to reopen foreclosures that already took place. This will have tremendous consequences and all title companies will do the same thing. We've never seen anything like this before."
Mark Stopa, a lawyer in Florida who represents homeowners, says the implications are huge. Buyers will not purchase homes that have been foreclosed upon if they don't have insurance that it's a clear title, he says.
"Would you buy the house? If there's questions about the title, you can't sell it, so who's going to buy it?" Stopa says.
And homeowners who have purchased properties that were foreclosed upon could also find their ownership challenged. A bank could have foreclosed upon a property and sold it to a third party. Later, the former homeowner may now come forward and say the foreclosure judgment has to be set aside because of faulty documents.
The current homeowner could find they no longer have any right to a home they had paid for, Stopa says, and in that case, they're likely to go to the title insurer and ask that their financial losses be covered.
"That's why title insurers don't want to stick their necks out," Stopa says.
And distressed homes, which include foreclosed properties and that now make up a significant number of housing sales, rose to 34% of sales in August from 32% in July; they were 31% in August 2009, according to the National Association of Realtors.
If homes that are foreclosed upon don't sell, that will also lead to more housing inventory. About 1.9 million first-mortgage loan defaults, the first step in the foreclosure process, are expected in 2010, according to Moody's Analytics.
http://www.usatoday.com/money/economy/housing/2010-10-02-old-republic-foreclosures_N.htm
Old Republic National Title Insurance, among the nation's largest title insurance companies, will no longer write new policies for homes foreclosed upon by J.P. Morgan Chase and Ally Financial's GMAC Mortgage unit –– a sign that concerns about faulty foreclosure paperwork could now endanger new sales of foreclosed homes.
Old Republic issued a bulletin to some agents stating that "the company will not insure title to any property which has been foreclosed by Ally Financial, Ally Bank or GMAC until further notice," according to a Sept. 29 copy of the memo. The concern is that other title companies will also refuse to issue policies for major lenders, which could have major ramifications for the housing industry.
And Maryln Weiner, a title agent and real estate lawyer in Boca Raton, Fla., said she received a bulletin saying that Old Republic would also not insure title policy to a purchaser who has bought a property from Chase when the bank has foreclosed on the home and are now selling it to third parties.
"They won't insure it after completion after the foreclosure," Weiner says. "This is going to set us back years. It's really going to be a mess. I think you're going to see actions to reopen foreclosures that already took place. This will have tremendous consequences and all title companies will do the same thing. We've never seen anything like this before."
Mark Stopa, a lawyer in Florida who represents homeowners, says the implications are huge. Buyers will not purchase homes that have been foreclosed upon if they don't have insurance that it's a clear title, he says.
"Would you buy the house? If there's questions about the title, you can't sell it, so who's going to buy it?" Stopa says.
And homeowners who have purchased properties that were foreclosed upon could also find their ownership challenged. A bank could have foreclosed upon a property and sold it to a third party. Later, the former homeowner may now come forward and say the foreclosure judgment has to be set aside because of faulty documents.
The current homeowner could find they no longer have any right to a home they had paid for, Stopa says, and in that case, they're likely to go to the title insurer and ask that their financial losses be covered.
"That's why title insurers don't want to stick their necks out," Stopa says.
And distressed homes, which include foreclosed properties and that now make up a significant number of housing sales, rose to 34% of sales in August from 32% in July; they were 31% in August 2009, according to the National Association of Realtors.
If homes that are foreclosed upon don't sell, that will also lead to more housing inventory. About 1.9 million first-mortgage loan defaults, the first step in the foreclosure process, are expected in 2010, according to Moody's Analytics.
Friday, October 1, 2010
California Man Charged With Running $10 Million Mortgage Fraud Scheme
Fri, 2010-10-01 12:04 — NationalMortgag...
A federal grand jury has indicted Juan Rangel of Downey, Calif. on a series of fraud charges for allegedly running two related fraud schemes—a Ponzi scheme that took more than $11 million from more than 300 victims, and a mortgage fraud scheme that preyed on homeowners by stealing the equity from their homes and secretly taking title to their properties. Rangel, who is already in federal custody after his conviction last year for bribing a bank manager at Bank of America, was charged in a 16-count indictment that was returned by a federal grand jury on Sept. 22.
In relation to the Ponzi scheme, the indictment alleges that Rangel and his company, the Commerce, Calif.-based Financial Plus Investments, recruited new investors through Spanish-language newspapers and magazines, as well as in radio advertisements and infomercials broadcast on television. Rangel and Financial Plus promised to pay investors guaranteed returns of 60 percent each year out of the profits from Financial Plus’ real estate investments and lending business. The indictment alleges that Financial Plus did not make any actual profits from real estate or lending, and that Rangel instead used the victims’ money to make Ponzi payments to other investors, as well as for his own personal use, including the monthly mortgage payments on his $3 million home, to make monthly lease payments for his Lamborghini sports car and a limousine, and to buy cocaine.
In the related mortgage fraud scheme, the indictment alleges that Rangel and others targeted Latino homeowners who were at risk of losing their homes and offered to help them avoid foreclosure. Rather than assist them, however, the indictment alleges that Rangel took titles to their homes and drained the remaining equity out of the properties. As part of this scheme, Rangel arranged to sell the homeowners’ properties, usually without their knowledge, to third-party straw buyers. He then applied for loans in the straw buyers’ names related to these supposed purchases, and used a variety of falsified documents to ensure that the fraudulent loans were approved. The proceeds from these loans went to Rangel and his companies. The indictment alleges that this scheme was successful in duping mortgage lenders into approving more than $10 million in fraudulent loans.
United States Attorney André Birotte Jr. announced the indictment after Rangel's two co-defendants were taken into custody this week and the indictment was unsealed.
Co-defendant Javier Juanchi of Sherman Oaks, Calif., a vice president at Financial Plus, was arrested by special agents with the Federal Bureau of Investigation (FBI). Juanchi, who is charged only in relation to mortgage fraud part of the scheme, was ordered held without bond. The third defendant in the case, Pablo Araque, also of Downey, Calif., who owns the Downey-based tax preparation and bookkeeping company A One Tax Pros, was arrested in late September. Araque, who is also charged only in relation to the mortgage fraud component of the scheme, is being held in jail pending a detention hearing scheduled for tomorrow afternoon.
Rangel, who is scheduled to make his first court appearance in this case tomorrow afternoon, is charged with a total of 11 counts of mail fraud, four counts of aggravated identity theft, and one count of money laundering, in relation to the two schemes he ran out of Financial Plus. If he is convicted of all 16 counts, Rangel would face a statutory maximum sentence of 232 years in federal prison.
Rangel owned and operated Financial Plus Investments, which was based in Commerce, Calif. Financial Plus purported to provide guaranteed returns to investors by using their money to invest in real estate and make high-interest loans to homeowners facing foreclosure. Financial Plus originally offered returns as high as 60 percent each year to investors, but during the later part of the scheme began to offer investors guaranteed annual returns of 100 percent on their investments. The indictment alleges, however, that only a small fraction of the money that Financial Plus received from investors was ever used to invest in real estate or to make loans. Instead, investor money was used to make monthly Ponzi payments to other investors that were falsely characterized as investment profits. At the same time, Rangel allegedly diverted a substantial portion of the investors’ money for his own use.
In addition to the company’s purported investment business, Financial Plus also purported to offer foreclosure relief services. Rangel and Juanchi identified Latino homeowners who were at risk of losing their homes but who appeared to still have substantial equity in their properties. Financial Plus then offered to help these homeowners avoid foreclosure. Many of the homeowners were told that Financial Plus would save their home by refinancing their mortgages using a co-signer who would be provided by the company. These homeowners were told that the co-signer would be removed from the loan after one year, once the homeowners had fixed their credit.
The indictment alleges, however, that Rangel and Juanchi did not refinance these homeowners’ properties. Instead, they arranged to sell the homeowners’ properties to straw buyers and apply for loans related to these supposed purchases in the straw buyers’ names. Rangel and Juanchi allegedly paid Araque to create false documents, including pay stubs and tax forms, to support the false information listed for the straw buyers on the fraudulent loan applications. Once the loans were funded by the victim banks, Rangel and his companies received the proceeds from the loans, funded by the equity from the homeowners’ properties, as well as title to their homes.
Rangel is currently pending sentencing for his conviction last year on federal charges of bribing a bank manager to falsify bank records and release holds on millions of dollars in checks that he deposited at the bank. Rangel’s son, Harold Rangel, was also charged in that case, but fled while on pretrial release.
For more information, visit http://losangeles.fbi.gov.
A federal grand jury has indicted Juan Rangel of Downey, Calif. on a series of fraud charges for allegedly running two related fraud schemes—a Ponzi scheme that took more than $11 million from more than 300 victims, and a mortgage fraud scheme that preyed on homeowners by stealing the equity from their homes and secretly taking title to their properties. Rangel, who is already in federal custody after his conviction last year for bribing a bank manager at Bank of America, was charged in a 16-count indictment that was returned by a federal grand jury on Sept. 22.
In relation to the Ponzi scheme, the indictment alleges that Rangel and his company, the Commerce, Calif.-based Financial Plus Investments, recruited new investors through Spanish-language newspapers and magazines, as well as in radio advertisements and infomercials broadcast on television. Rangel and Financial Plus promised to pay investors guaranteed returns of 60 percent each year out of the profits from Financial Plus’ real estate investments and lending business. The indictment alleges that Financial Plus did not make any actual profits from real estate or lending, and that Rangel instead used the victims’ money to make Ponzi payments to other investors, as well as for his own personal use, including the monthly mortgage payments on his $3 million home, to make monthly lease payments for his Lamborghini sports car and a limousine, and to buy cocaine.
In the related mortgage fraud scheme, the indictment alleges that Rangel and others targeted Latino homeowners who were at risk of losing their homes and offered to help them avoid foreclosure. Rather than assist them, however, the indictment alleges that Rangel took titles to their homes and drained the remaining equity out of the properties. As part of this scheme, Rangel arranged to sell the homeowners’ properties, usually without their knowledge, to third-party straw buyers. He then applied for loans in the straw buyers’ names related to these supposed purchases, and used a variety of falsified documents to ensure that the fraudulent loans were approved. The proceeds from these loans went to Rangel and his companies. The indictment alleges that this scheme was successful in duping mortgage lenders into approving more than $10 million in fraudulent loans.
United States Attorney André Birotte Jr. announced the indictment after Rangel's two co-defendants were taken into custody this week and the indictment was unsealed.
Co-defendant Javier Juanchi of Sherman Oaks, Calif., a vice president at Financial Plus, was arrested by special agents with the Federal Bureau of Investigation (FBI). Juanchi, who is charged only in relation to mortgage fraud part of the scheme, was ordered held without bond. The third defendant in the case, Pablo Araque, also of Downey, Calif., who owns the Downey-based tax preparation and bookkeeping company A One Tax Pros, was arrested in late September. Araque, who is also charged only in relation to the mortgage fraud component of the scheme, is being held in jail pending a detention hearing scheduled for tomorrow afternoon.
Rangel, who is scheduled to make his first court appearance in this case tomorrow afternoon, is charged with a total of 11 counts of mail fraud, four counts of aggravated identity theft, and one count of money laundering, in relation to the two schemes he ran out of Financial Plus. If he is convicted of all 16 counts, Rangel would face a statutory maximum sentence of 232 years in federal prison.
Rangel owned and operated Financial Plus Investments, which was based in Commerce, Calif. Financial Plus purported to provide guaranteed returns to investors by using their money to invest in real estate and make high-interest loans to homeowners facing foreclosure. Financial Plus originally offered returns as high as 60 percent each year to investors, but during the later part of the scheme began to offer investors guaranteed annual returns of 100 percent on their investments. The indictment alleges, however, that only a small fraction of the money that Financial Plus received from investors was ever used to invest in real estate or to make loans. Instead, investor money was used to make monthly Ponzi payments to other investors that were falsely characterized as investment profits. At the same time, Rangel allegedly diverted a substantial portion of the investors’ money for his own use.
In addition to the company’s purported investment business, Financial Plus also purported to offer foreclosure relief services. Rangel and Juanchi identified Latino homeowners who were at risk of losing their homes but who appeared to still have substantial equity in their properties. Financial Plus then offered to help these homeowners avoid foreclosure. Many of the homeowners were told that Financial Plus would save their home by refinancing their mortgages using a co-signer who would be provided by the company. These homeowners were told that the co-signer would be removed from the loan after one year, once the homeowners had fixed their credit.
The indictment alleges, however, that Rangel and Juanchi did not refinance these homeowners’ properties. Instead, they arranged to sell the homeowners’ properties to straw buyers and apply for loans related to these supposed purchases in the straw buyers’ names. Rangel and Juanchi allegedly paid Araque to create false documents, including pay stubs and tax forms, to support the false information listed for the straw buyers on the fraudulent loan applications. Once the loans were funded by the victim banks, Rangel and his companies received the proceeds from the loans, funded by the equity from the homeowners’ properties, as well as title to their homes.
Rangel is currently pending sentencing for his conviction last year on federal charges of bribing a bank manager to falsify bank records and release holds on millions of dollars in checks that he deposited at the bank. Rangel’s son, Harold Rangel, was also charged in that case, but fled while on pretrial release.
For more information, visit http://losangeles.fbi.gov.
OCC Orders Top Servicers to Check Their Foreclosure Practices
National Mortgage News
Friday, October 1, 2010
The Office of the Comptroller of the Currency has ordered seven of the nation's largest residential bank servicers to review their foreclosure processes in the wake of revelations by Ally Financial that it had cut corners when taking title to homes backed by delinquent mortgages.
The seven banks include: Bank of America, Citigroup, HSBC, JPMorgan Chase, PNC Bank, U.S. Bancorp, and Wells Fargo & Co.
According to figures compiled by National Mortgage News and the Quarterly Data Report, B of A, Wells, and JPM rank first, second and third, respectively, in terms of residential servicing rights with $5.2 trillion in housing receivables and a combined market share of 54%. (The rankings are as of June 30.)
Citi ranks fourth, and USB sixth. PNC, through its National City Mortgage unit, ranks ninth. HSBC is way down on the list at number 18.
Walsh told lawmakers on Thursday that some servicers have "deficiencies" when it comes to their foreclosure practices.
Ally Financial and JPM have halted, for now, foreclosures in several states, pending a review of their policies and procedures. Several state attorney generals are now reviewing the matter.
Friday, October 1, 2010
The Office of the Comptroller of the Currency has ordered seven of the nation's largest residential bank servicers to review their foreclosure processes in the wake of revelations by Ally Financial that it had cut corners when taking title to homes backed by delinquent mortgages.
The seven banks include: Bank of America, Citigroup, HSBC, JPMorgan Chase, PNC Bank, U.S. Bancorp, and Wells Fargo & Co.
According to figures compiled by National Mortgage News and the Quarterly Data Report, B of A, Wells, and JPM rank first, second and third, respectively, in terms of residential servicing rights with $5.2 trillion in housing receivables and a combined market share of 54%. (The rankings are as of June 30.)
Citi ranks fourth, and USB sixth. PNC, through its National City Mortgage unit, ranks ninth. HSBC is way down on the list at number 18.
Walsh told lawmakers on Thursday that some servicers have "deficiencies" when it comes to their foreclosure practices.
Ally Financial and JPM have halted, for now, foreclosures in several states, pending a review of their policies and procedures. Several state attorney generals are now reviewing the matter.
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