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Mortgage e-Alert: Pending California Legislation

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(4-24-2017) – From our good friends at the Thordsen Law Offices:

PENDING CALIFORNIA LEGISLATION THAT AFFECTS REAL ESTATE LICENSEES, MORTGAGE LOAN ORIGINATORS AND LANDLORDS

FACTS

AB 325  Termination of tenancy/sale of property left behind. (amends Civil Code Section 1988)

This bill requires personal property left behind by a residential tenant be sold at public sale subject to competitive bidding and held in the county where the vacated premises are located. If the landlord reasonably believes that the total resale value of the property not released is less than seven hundred dollars ($700), the landlord may retain the property for his or her own use or dispose of it in any manner. Nothing in this section shall be construed to preclude the landlord or tenant from bidding on the property at the public sale.

MORAL

Landlords keep track of this bill and read it VERY carefully. It controls the liability in the event a tenant that has left sues.

AB 543- Residential Apartment Managers and Minimum Wage
Section 1182.8 of the Labor Code is amended to read:
(a) No employer shall be in violation of any provision of an applicable order of the Industrial Welfare Commission relating to credit or charges for lodging for charging, pursuant to a voluntary written agreement, a resident apartment manager up to two-thirds of the fair market rental value of the apartment supplied to the manager, if credit for the apartment is not applied to meet the employer’s minimum wage obligation to the manager.
(b) If an employer does not charge a resident apartment manager to occupy the apartment supplied to him or her, the employer, pursuant to a voluntary written agreement, may apply up to one-half of the fair market rental value of the apartment to meet the employer’s minimum wage obligation to the manager without violating any provision of an applicable order of the Industrial Welfare Commission relating to credit or charges for lodging.

MORAL

Notice the words “voluntary written agreement.”  No voluntary written agreement equals no exemption and then the landlord has minimum wage issues. Landlords need to watch this bill.

AB 749 Substantial Changes to Real Estate Law affecting Licensees
This bill recasts and redefines the term “salesperson” as a person who is retained by a licensed real estate broker. This bill defines the term “retained” to mean the relationship between a broker and a real estate licensee who is an independent contractor affiliated with, or an employee of, a broker to perform certain real estate activities subject to a broker’s supervision. The bill also defines various other terms to describe the relationships between real estate brokers and salespersons and the parties involved in the sale of real estate transactions, including, but not limited to, seller, buyer, seller’s licensee, buyer’s licensee, dual broker, and dual licensee.

This bill requires a real estate licensee to immediately notify the commissioner whenever a licensee affiliates or is retained by a real estate broker, if that agreement is terminated, or if the licensee acquires a new business address.

This bill authorizes a licensee to enter into an agreement with another licensee to share compensation provided that the compensation is paid through the responsible broker. The bill defines a “responsible broker” as a real estate broker responsible for the exercise of control and supervision of real estate salespersons.

When a licensee prepares or has prepared an agreement authorizing or employing such licensee to perform any of the acts for which he or she is required to hold a license, or when such licensee secures the signature of any person to any contract pertaining to such services or transaction, he or she is required to deliver a copy of the agreement to the person signing it at the time the signature is obtained.
This bill requires the copy of the agreement to be delivered either in print or electronic record as soon as practicable after obtaining the signature.

Existing law requires a notice containing certain information to be filed with the commissioner within a specified period of time after the first transaction and within that same time period if there is any material change in the required information. Existing law requires the broker or the designated officer or corporate broker to sign the notice.  This bill requires the responsible broker to sign that notice.

Existing law requires the real estate salesperson’s license to remain in the possession of the licensed real estate broker employer until canceled or until the salesperson leaves the employ of the broker, and the broker is required to make his or her license and the licenses of his salespersons available for inspection by the commissioner.  This bill repeals those requirements.

Existing law authorizes the commissioner to suspend or revoke the license of a real estate licensee, delay the renewal of a license of a real estate licensee, or deny the issuance of a license to an applicant, who has committed specified acts. Existing law also authorizes the commissioner to suspend or revoke the license of a corporation, delay the renewal of a license of a corporation, or deny the issuance of a license to a corporation, if an officer, director, or person owning or controlling 10 or more of the corporation’s stock has done specified acts.  This bill authorizes the commissioner to take such action for failure to surrender a license issued in error or mistake.

Under existing law, when a real estate license is issued to a corporation, if it desires any of its officers other than the specified designated officer to act under its license as a real estate broker, it is required to procure an additional license to so employ each additional officer.

This bill authorizes a corporation, in the event of death or incapacity of a sole designated broker-officer, to operate continuously under its existing license if notice and an application is provided to the bureau within a specified period of time of the death or incapacity.

Under existing law, each officer of a corporation through whom it is licensed to act as a real estate broker is, while so employed under that license, a licensed real estate broker, but is only licensed to act as such for and on behalf of the corporation as an officer.

This bill does not preclude a designated corporate officer who has a separate individual license from conducting licensed activity for another entity if the entity for which he or she acts is clearly disclosed and apparent to any member of the public using his or her services outside the corporation. When a corporation wishes to act as a real estate broker, the bill would require the corporation to be licensed by the bureau through qualified broker-officers. The bill provides that an officer of a corporation through whom it is licensed to act need not maintain an individual broker’s license, but would provide that the officer is subject to all duties and responsibilities of a licensed real estate broker.

MORAL

This requires a conference because of dramatic changes.  If you would like us to speak to your organization on these proposed  changes for 2018 contact Herman Thordsen who will prepare a syllabus and speak to the proposed new laws and explain their effect on  each licensee and the potential for discipline by the California Bureau of Real Estate.

PENDING LEGISLATION THAT AFFECTS ALL REVERSE MORTGAGES

FACTS

SB 739 (California). REVERSE MORTGAGES: LENDER NOTICE REQUIREMENTS.
Under existing law, a “reverse mortgage” means a nonrecourse loan secured by real property if the loan provides cash advances to a borrower based on the equity or the value in a borrower’s owner-occupied principal residence, the loan requires no payment of principal or interest until the entire loan becomes due and payable, and the loan is made by a specified licensed or chartered lender. Existing law requires the lender to prominently disclose in the loan agreement any interest rate or other fees to be charged during the period that commences on the date that the reverse mortgage loan becomes due and payable, and that ends when repayment in full is made. Existing federal law authorizes the nonborrowing spouse of a reverse mortgage borrower to exercise an option, sometimes referred to as a mortgagee optional election (MOE), to further defer the due and payable status of the reverse mortgage upon the death of the borrower, upon meeting specified conditions.

This bill prohibits a lender from making a reverse mortgage loan on a principal residence without first informing the borrower, and nonborrowing spouse of the opportunity for a nonborrowing spouse to exercise the option described above to permit that spouse to remain in the residence following the death of the borrowing spouse upon the satisfaction of specified conditions. The bill for a reverse mortgage entered into on or after January 1, 2018, prohibits a lender from initiating a foreclosure on a principal residence after the death of the borrowing spouse unless the notice requirements regarding the option were met and the nonborrowing spouse was given the opportunity to exercise the option.

MORAL

If anyone reading this is doing reverse mortgages they just might want to read this legislation carefully and keep track to see if it becomes law in 2018.

CalBRE Licensee Alert: Issued March 2017

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Supplemental Disciplinary Advisory to Real Estate Salespersons Who Mislead Consumers into Falsely Believing that They are Brokers — and a Concurrent Caution to the “[Ir]responsible” Brokers Who Permit or Support Such Practices

By Wayne S. Bell, California Real Estate Commissioner and
Mark Tutera, Special Investigator

In September 2015, the California Bureau of Real Estate (CalBRE) issued an advisory which was captioned “Disciplinary Warning to Real Estate Salespersons Who Act, Conduct Themselves, and/or Advertise as ‘Independent’ Real Estate Professionals — and a Simultaneous Caution to Brokers Who Allow or Support Such Practices”.

(Download PDF copy of this report here.)

Licensees of CalBRE are well advised to review that prior advisory since we continue to see
some of the same bad practices identified in that writing. [Read more…]

Mortgage e-Alert: HUD/FHA and other news

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MORTGAGE e-ALERT©
(3-2-2017) from Thordsen Law Offices

  1. HUD/FHA home sold for less than the balance owed.
  2. Long Beach, California Real Estate Broker goes to prison for using straw buyers.
  3. 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

FACTS

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)

MORAL

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”

FACTS

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)

MORAL

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

FACTS

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)

MORAL

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.

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

THORDSEN LAW OFFICES
Toll Free (888) 667-8529.  (714) 662-4990 (310) 277-4254

Herman Thordsen, Esq.* Direct Line-(714) 662-4993
Sean Thordsen, Esq.**    Direct Line-(714) 662-4995

*      Licensed in California State and Federal Courts
**    Licensed in California and Nevada State and Federal Courts

CONSUMER e-ALERT© for December 5, 2016

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CONSUMER e-ALERT©

From our friends at Thordsen Law Offices:

  1. Employers in Los Angeles city are not allowed to ask about criminal convictions of potential employees.  If you have a question you may call me at no cost to discuss .
  2. California residence in a revocable trust can still be homesteaded for protection of the family.
  3.  Father is denied reduction in child support where he is paying $17,500.  Read to find out why.
  4.  Ford recalls more than 600,000 midsize sedans.  Is yours one of them?  Should it be?
  5.  Would you like to make $9 million. Read on about becoming a whistle blower.

LOS ANGELES, CALIFORNIA TO STOP POTENTIAL EMPLOYERS FROM ASKING QUESTIONS ABOUT CRIMINAL CONVICTIONS

FACTS

The ordinance passed with one dissent.  Because of this the council must vote on the matter again since the initial vote was not unanimous.  It is expected to pass since subsequent votes require a mere majority.

If given final approval, employers with 10 or more workers and city contractors will be prohibited from asking about criminal history until a conditional job offer has been made.

An employer who ultimately decides against hiring a person after learning about his or her criminal record would need to provide a justification for why the job offer is being rescinded.

City officials point to statistics from the National Institute of Justice that show the likelihood of a job offer goes down 50 percent if an applicant has a criminal record.

MORAL

Remember.  The employer has to justify the nonhiring. This has the potential for numerous employee lawsuits.   Is the employer insured against this potential liability?

CALIFORNIA HOME DEEDED TO A REVOCABLE TRUST CAN STILL BE PROTECTED BY THE HOMESTEAD LAW

FACTS

The defendants in this case had transferred title to a revocable living trust.  Later as trustees of the trust they filed a homestead exemption. The court ultimately upheld the exemption when a creditor tried collect on a judgment even though title was in the name of a trust.  (10calapp4th1810-1992)

MORAL

It is still safer to file the homestead before putting it into a revocable trust. Note that it is revocable.  Maybe the clients of mortgage brokers should be informed about the advantages of a homestead?

ONE WAY A FATHER DOES NOT GET HIS CHILD SUPPORT REDUCED

FACTS

Respondent father a successful director and producer requested the trial court to reduce his monthly child support payment to $9,842, from the original amount entered into at the time of dissolution of $17,500, The mother-appellant claimed that respondent’s reduced income did not constitute a material change in circumstances in light of his extreme wealth. Appellant further contends that the trial court imputed an unreasonably low rate of return to respondent’s substantial assets, valued at over $67 million. The court concluded that substantial evidence did not support the trial court’s finding of a material change in respondent’s circumstances for purposes of meeting his child support obligation; in light of respondent’s overall wealth, the reduction in his employment income did not materially impair his ability to pay the agreed upon child support; and the trial court imputed an unreasonably low rate of return to respondent’s tens of millions of dollars in assets. Go to http://j.s to read the case.

MORAL

With high wage earners the normal guidelines do not apply.  If you pay or are receiving child support you may wish to review the guidelines currently to see if you may be entitled to a decrease (if paying) or an increase (if receiving) child support.

FORD RECALLS MORE THAN 680,000 MIDSIZE SEDANS BECAUSE THE FRONT SEAT BELTS MAN NOT HOLD PEOPLE IN A CRASH

FACTS

This covers certain 2014-2016 Ford Fusion, 2013-2015 Lincoln MKZ and 2015-2016 Ford Mondeo cars.  Heat generated when the seat belt pre-tensioners deploy can cause cables to break. When that happens the seat belts may not hold people as for example in sudden stops or rear end crashes. At least two injuries have occurred over this issue. (ocrnsw1712316)

MORAL

If this has occurred to anyone that has been injured in a crash you may contact us for a free consultation.

WOULD YOU LIKE TO MAKE $9 MILLION OR MORE?  READ ON

TEXAS JURY FINDS NEW YORK MORTGAGE COMPANY AND CEO JIM C. HODGE LIABLE FOR CIVIL MORTGAGE FRAUD TO THE TUNE OF $92 MILLION MOSTLY INVOLVING FHA LOANS-WHISTLEBLOWER MAY WIND UP WITH $9 MILLION OR MORE DEPENDING ON WHAT IS ACTUALLY COLLECTED.

FACTS

On November 29, 2016 a civil jury found Allied Home Mortgage Entities a Direct Endorsement Lender (DEL) and it’s CEO Jim C. Hodge Liable for Civil Mortgage Fraud, Awards The United States Over $92 Million In Damages
NOW Allied Home Mortgage and CEO Face Statutory Trebling of Damages and Penalties for Fraudulent Conduct.

The entities formerly known as ALLIED HOME MORTGAGE CAPITAL CORPORATION (“ALLIED CAPITAL”) and ALLIED HOME MORTGAGE CORPORATION (“ALLIED CORPORATION”) (collectively, “ALLIED”), as well as ALLIED’s president and chief executive officer JIM C. HODGE (“HODGE”), liable for violating the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) in connection with over a decade of fraudulent misconduct related to ALLIED’s participation in the Federal Housing Administration (“FHA”) mortgage insurance program.

The jury awarded the United States a total of $92,982,775 in damages, including $7,370,132 against HODGE.  Pursuant to the FCA, damages in this case are subject to mandatory trebling.  In addition, the FCA provides for a penalty of $5,500 to $11,000 for each violation.  Separately, FIRREA provides for a penalty for each statutory violation.  The Court will determine the amount of the penalties at a later date.

As a HUD-approved loan correspondent, ALLIED CAPITAL originated FHA-insured mortgage loans.  ALLIED CAPITAL was required to seek HUD approval for each branch office from which it originated FHA loans.  Instead of complying with this requirement, however, ALLIED CAPITAL, with HODGE’s knowledge and approval, operated over one hundred “shadow” branch offices that originated FHA loans without HUD authorization.  As part of its scheme to deceive HUD, ALLIED CAPITAL submitted loans originated by those branches to HUD using the ID numbers of approved branches.  ALLIED CAPITAL’s undisclosed shadow branches were not subject to HUD oversight and their default rates were disguised by the default rates of branches whose IDs they were using.  This fraudulent misconduct resulted in $7,370,132 in losses to HUD when certain of those loans defaulted.

ALLIED CORPORATION recklessly underwrote and certified at least 1,192 loans for FHA insurance that were ineligible for insurance under HUD’s guidelines.  This fraudulent misconduct resulted in losses to HUD of $85,612,643 when those loans defaulted.

ALLIED and HODGE operated a dysfunctional quality control program and lied to HUD about it.  HUD requires lenders participating in its programs to timely perform quality control audits of their FHA loans to identify and correct systemic problems, including underwriting problems.  ALLIED employed only a handful of quality control employees to review loans from as many as 600 branch offices.  Many of those employees were unqualified to audit FHA-insured loans.  In addition, HODGE personally directed his employees to falsify quality control reports to give the impression that required reviews had been performed, when in fact they had not.  When HUD auditors later asked for those quality control reports, ALLIED provided the falsified reports.  ALLIED and HODGE also falsely certified to HUD on an annual basis that ALLIED was in compliance with HUD’s quality control requirements.

The United States filed a complaint-in-intervention in this lawsuit in November 2011.  At that time, the action was pending as a qui tam whistleblower lawsuit in the United States District Court for the Southern District of New York.  In September 2012, the action was transferred to the United States District Court for the Southern District of Texas. (usattsdny113016)

MORAL

If qui tam when started the “whistleblower” is going to get a lot of money.  Usually ten percent of what is collected. Even of $92,000,000 that comes to $9 million dollar award.  Do you know anyone cheating the government?

HE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

 

THORDSEN LAW OFFICES
Herman Thordsen, Esq.
(Licensed in California State and Federal Courts)
(888) 667-8529  / (310) 277-4254

CAMP Sales and Marketing Convention

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camp-sales-mktg-event-2016

With business booming and mortgage professionals busier than ever, CAMP has completely reinvented our annual Sales and Marketing Convention. The two-day event, which includes a chapter leadership training, trade show, speakers, and cocktail reception, will be held as two separate one-day events, with the first held in Northern California (2/3/17) and the second held in Southern California (2/13/17). Why did CAMP alter the Sales and Marketing format?  CAMP felt it was in the best interest of members and vendors to reduce travel for CAMP members, eliminate the price to attend, and increase attendance!

We are inviting all CAMP Members to attend the event(s) for FREE! Non-Members pay $25. (But why do that when you can join CAMP today and start reaping all the member benefits? Learn more about CAMP’s FREE Member Webinar series: CLASI!)

Sales and Marketing 2017: North will be held on Friday, February 3, 2017 at the Walnut Creek Marriott. More details and registration information HERE.

Sales and Marketing 2017: South will be held on Monday, February 13 at the Hyatt Regency Orange County. More details and registration information HERE.

CAMP invites vendors to join us and exhibit at both events for maximum exposure. Visit the Sales and Marketing 2017 Webpage to download the complete Expo/Sponsor Package.

Have questions? Email info@thecampsite.org.

The Inability to Pay Is Immaterial: Orcilla Lowers the Standard

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A 2016 California appellate court ruling, Orcilla vs. Big Sur, Inc., has introduced new uncertainty to the ever-more-complex arena of real estate investing. The ruling found that the original buyers of a property can challenge a foreclosure if the circumstances at the time of origination — in this case, the inability of the buyers to afford their payment — are deemed unconscionable.

house-photo
What does this mean for the investor whose portfolio contains non-performing notes or the institutions that handle such loans? Read on to learn more about the Orcilla ruling and its potential impact on the real estate market.

A Brief Overview of the Orcilla Case

A company named Quick Loan gave the Orcillas, a couple with limited English comprehension, a refinance loan in 2006. The terms led to a monthly payment that exceeded the couple’s take home income by more than 30 percent. After an initial default, the foreclosing lender proposed a loan modification that increased the monthly payment by several hundred dollars. The second default resulted in the sale of the home to a third party, who eventually evicted the Orcillas. Meanwhile, Quick Loan had lost its license for using trustee money to purchase casino markers.

This cautionary tale of the pre-recessionary lending market and its most egregious practices would have come to nothing had the Orcillas not appealed when their initial claim was dismissed. In spite of the fact that they could not prove material damages, the appellate court ruled that the loan was so procedurally unconscionable that it met the standard for substantive unconscionability even though the Orcillas did not meet all of the elements of their claim.

The Possible Impact of Orcilla on the Real Estate Investment Market

The Orcilla case against the bona fide purchaser, Big Sur, is concerning for several reasons. First, the claim of substantive unconscionability rendered the fact that the Orcillas were not able to make good on the loan immaterial; in this ruling, procedural mistakes trump the debtor’s ability to pay. Second, the ruling overlooking existing laws designed to protect the consumer from fraud and opened the door to a much broader and ill-defined set of challenges.

Most importantly, though, the ruling sweeps aside the rights and protections of BFPs who act in good faith when taking over a defaulted loan. If the Orcilla ruling sets the precedent for other states, the foreclosure market will become a lot more uncertain; investors and lenders alike may become unduly cautious about investing in the scratch and dent market for fear of losing monies because of unknown irregularities in the original loan documents.

Peak Foreclosure Services, Inc. specializes in a wide range of default servicing solutions to support and meet the needs of banks, private investors, servicers, and sub-servicers. The company offers both judicial and non-judicial in-house foreclosure services, reconveyance, post foreclosure services, and loss mitigation in eleven states –- A rizona, California, Idaho, Montana, Nevada, North Carolina, Oregon, Texas, and Washington. They also offer national foreclosure referral services through carefully selected counsel and handle everything from payment processing to foreclosure and bankruptcy processing, REO repair, and disposition services. They are a true one-stop solution for all their clients’ foreclosure servicing needs.

Changes to The Consumer Financial Protection Bureau

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News from our friend and Real Estate Educator, Duane Gomer:

A bill has been introduced to the House of Representatives to make some major changes to the CFPB which was formed by the Dodd-Frank Bill in 2010. The Republicans have always expressed dissatisfaction with this Bureau that was basically formulated by Elizabeth Warren before she became a Senator.

Some of the changes:

#1- The Act would change the name to the “Consumer Financial Opportunity Commission” (CFOC.)

#2- The purpose would be Consumer Protections and the Creation of Competitive Markets.

#3- There would be a five membership commission instead of a one person Director.

#4- There would be oversight by Congress.

#5- No more risk regulation of non-banks by the Fed.

#6-  Revise Qualified Mortgage and Ability to Repay regulations to allow higher DTI and LTV on loans eligible under safe harbors.

#7- Change Basel III rules on capital thresholds and repeal the Volcker rule concerning Bank Ownership of hedge funds, private equity funds, etc.

Any questions about these topics, talk to your friendly State-Licensed Mortgage Loan Originator. Most of the discussion is above my pay-grade.

Change of the CFPB and reestablishment of the Glass/Stegall Act will depend on our upcoming elections as you all know.

For more information check this link: http://files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf

Six Simple Questions Guaranteed to Convert Prospects Into Clients Faster

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Duane Gomer, educator extraordinaire recently sent out a newsletter recommending a great article for MLO’s.  Here’s what Duane wrote:

Cindy Douglas is one of our most treasured instructors for MLO education. She is loaded with knowledge, personality and delivers her message clear and concise, therefore earning marvelous reviews and testimonials.

Let’s see what Cindy says about herself on her website, CindyDouglas.com. Cindy Douglas is an accomplished 30-year veteran of the southern California home mortgage environment. Her expertise spans from starting as a loan processor, to becoming a high producing originator, then moving on to lead production and operations management.

I would highly recommend her recent article to MLO’s and Real Estate Agents. The title is “Six Simple Questions Guaranteed to Convert Prospects Into Clients Faster”.

  1. In a perfect world how would your business operate?
  2. Paint me a picture on how your business looks today?
  3. It seems there is a gap between where you would like to be and where you are now. What do you think is stopping you from moving forward?
  4. What is the number one thing that needs to happen for you to reach your potential?
  5. What is your current plan and do you have a plan “B” while you are perfecting your business model?
  6. I’d really like to help you close that gap.

What do you think? Want to read the Answers to the questions?  Go to Cindy Douglas.com and while you are there sign up for her email. Also, you can visit Cindy at Duane Gomer Education offerings in the Inland Empire and Desert areas. Watch for Cindy’s new book coming soon. Working title is “12 Steps to Success: Powerful Lessons from Top Mortgage Professionals Who Survived the Worst Financial Crisis Since the Depression.”

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Standard Mortgage Financial Services, Inc.
6700 Indiana Avenue Suite 220
Riverside, CA 92506-1827
Phone (951) 686-9639
Toll Free (800) 476-5626
Jeff's Direct Line (562) 806-2921
Fax (951) 686-0361
California BRE #01211863