(3-2-2017) from Thordsen Law Offices
- HUD/FHA home sold for less than the balance owed.
- Long Beach, California Real Estate Broker goes to prison for using straw buyers.
- Employer claims employee is exempt from overtime and loses to employee for over $100,000 in back wages.
SELL HUD/FHA INSURED PROPERTY FOR LESS THAN THE BALANCE ON THE MORTGAGE
UNKNOWN CITIZEN tips off HUD/FHA about preforeclosure sale violation in St. Louis, MO area. The preforeclosure sale option allows borrowers in default (resulting from an adverse and unavoidable financial situation) to sell their home at fair market value and use the sale proceeds to satisfy the mortgage debt even if the proceeds are less than the amount owed. This option is for borrowers whose financial situation requires that they sell their home, but are unable to without FHA relief because the gross recovery on the sale of their property (sale price minus sale expenses) is less than the amount owed on the mortgage.
The services of a real estate broker-agent must be retained to market a property within 7 days of the date on which the approval to participate is granted.
The broker-agent selected should have no conflict of interest with the borrower, the lender, the appraiser, or the purchaser associated with the preforeclosure sale transaction. Any conflict of interest, appearance of a conflict, or self-dealing by any of the parties to the transaction is strictly prohibited.
The purchaser of the property entered into a consulting agreement with the realtor for the preforeclosure sale. The agreement required that when the purchaser later sold the property, he would pay half of the net proceeds from the sale of the property to the realtor’s consulting company.
Despite having this additional agreement in place, the purchaser signed the arm’s-length affidavit as the buyer and affirmed, “…there are no agreements, special understandings, hidden terms, or contracts between the parties other than the Contract…”
The property was sold a second time on the day of the preforeclosure sale. The title company paid $19,140 from the proceeds of the second sale to the realtor’s consulting company. HUD strictly prohibits any conflict of interest or self-dealing by preforeclosure sale participants. HUD paid a claim for $139,323 to the lender because the preforeclosure sale price was less than the balance of the loan.
Later on December 17, 2015, HUD served a complaint on the purchaser, alleging that the purchaser caused the submission of a false claim to HUD and made multiple false statements in the arm’s length
affidavit and seeking a penalty and an assessment under the Program Fraud Civil Remedies Act.
HUD and the purchaser entered into a settlement agreement where the purchaser agreed to pay HUD $5,000. November 18, 2016, the settlement agreement of $5,000 had been reached and it represents an amount due HUD. (2017-KC-1801)
Since this was a fraud on HUD/FHA the purchaser was really lucky. Fraud on FHA can be prosecuted as a felony under 3 different code sections of Title 18 United States Code which is the criminal volume for federal crimes.
LONG BEACH, CALIFORNIA REAL ESTATE BROKER AND ONE OTHER GO TO FEDERAL PRISON FOR USING “STRAW BUYERS”
On March 2, 2017, JOHN MARTYNEC, 41, licensed real estate broker from Long Beach California and ELEK ANDRADE 32, of Downey linked to a mortgage fraud scheme that cost at least $2.4 million when fraudulently purchased homes went into foreclosure have been sentenced to federal prison.
This was a scheme to fraudulently obtain mortgages for residential properties through the use of “straw buyers” who pretend to purchase the properties and had no intention of living in the homes. In this case, the straw buyers’ personal information was used to obtain mortgages without their knowledge. At the time of the scheme it was run out of JTR REAL ESTATE, INC., a Norwalk-based real estate brokerage company (license now expired) which bought, renovated and sold residential properties.
The two defendants sentenced on Monday by United States District Judge Dale S. Fischer were:
• John Martynec, 41, of Long Beach, a licensed real estate broker and co-owner of JTR, who previously pleaded guilty to one count of conspiracy and was sentenced to two years in prison; and
• Elek Andrade 32, of Downey, who also previously pleaded guilty to one count of conspiracy and was sentenced to one year and one day in federal prison. (reason for one day is it allows for an early release whereas if exactly one year he would have to serve all the prison time)
In addition to the prison terms, Judge Fisher ordered both men to pay $2,573,092 in restitution.
Martynec was responsible at JTR for identifying distressed residential properties which could be purchased, renovated, and then sold for a profit. Andrade worked for Martynec as a real estate agent and assisted in selling the properties. When the market for renovated properties slowed in 2007, Martynec and Andrade engaged in a scheme to use straw buyers to purchase the renovated homes.
The loan applications were submitted without the knowledge of the straw buyers and included fraudulent supporting documents, such as verifications of employment.
A third defendant who fabricated documents that were submitted with the fraudulent loan applications – MIREYA ESPINOZA, 36, OF CARSON – was sentenced on February 6 to one year and one day in prison and was ordered to pay $1,476,966 in restitution. (usattycdca3217release no. 17-043)
Still prosecuting crimes from 2007. The FBI may be working through a check list since the prosecution complaint has to be filed within ten years of the actual offense.
CALIFORNIA EMPLOYEE CLAIMED EXEMPT BY EMPLOYER
EMPLOYER PAYS OVER $100,000 FOR WRONGFUL CLASSIFICATION
On February 28, 2017 the California Labor Commissioner’s Office announced a Northern California hunting club paid an on-site caretaker $100,867 in back wages after the wage claim hearing officer ruled the worker was making less than minimum wage. He was MISCLASSIFIED AS AN EXEMPT, SALARIED EMPLOYEE and should have been paid hourly.
The caretaker of BUTTE LODGE OUTING CLUB, INC. IN COLUSA filed a claim for unpaid wages from April 2014 to June 2016. Following the hearing, the Labor Commissioner’s Office awarded the worker $76,003 in overtime wages, $17,988 in liquidated damages, and $6,875 in interest!
The 55-year-old caretaker had been employed at the hunting club for 18 years as a salaried employee paid biweekly. In addition to the care of the property, the worker was tasked with planting the wetlands with trees, grasses and grain preferred by waterfowl, and upon request, frequently plucked, gutted and cleaned the ducks shot down by the lodge members. He worked more than 70 hours a week during duck hunting season, which normally takes place for 10 to 12 weeks from October through January.
Most workers in California, unless exempt from overtime laws must receive overtime pay of 1.5 times the regular rate of pay for all hours worked over 8 hours in a workday or over 40 hours in a week, and double the regular rate of pay for all hours worked over 12 hours in a workday. Workers paid less than minimum wage are also entitled to liquidated damages which equal the amount of underpaid wages plus interest. (Release No.: 2017-16 February 28, 2017)
There has been an increase in investigations by Department of Labor Standards Enforcement (DLSE), EDD and CalBRE due to improper classification of employees as independent contractors. There are “magic words” that must be use when hiring independent contractors licensed by the California Bureau of Real Estate. If not used, then no matter how good the agreement the court, Labor Commissioner and the California Bureau of Real Estate will find them invalid. However, there is a statute of limitations that requires claims/lawsuits to be brought within three years.
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