View
222
Download
0
Category
Tags:
Preview:
Citation preview
Chapter 1: Financial CrisisChapter 1: Financial Crisis
Industry InsidersIndustry Insiders
Collaboration
Collusion
Collaboration
Collusion
U.S. Mortgage FraudU.S. Mortgage Fraud
Affects Real Estate Values
Rental Markets
Affects Real Estate Values
Rental Markets
State (2005 Data)
MARI Fraud Ranking
Subprime Loan Rank
Florida 1 1
Utah 2 2
Georgia 3 5
Colorado 4 6
Illinois 5 4
Missouri 6 3
Texas 7 7
Mortgage Fraud in the USMortgage Fraud in the US
Fraud
1974-1975
2000-2005
Fraud
1974-1975
2000-2005
Effects of ForeclosuresEffects of Foreclosures Boarded Up Homes
Negative Feelings
Difficult to Find Buyers
Lower Tax Appraisals
Eroded Tax Base
Fewer Community Services
Boarded Up Homes
Negative Feelings
Difficult to Find Buyers
Lower Tax Appraisals
Eroded Tax Base
Fewer Community Services
Effects of ForeclosuresEffects of Foreclosures
Foreclosed PropertyLowers for 1/8 Mile
.9% to 1.44%
Each Foreclosed PropertyReduces by 1.8%
There Goes the Neighborhood
Foreclosed PropertyLowers for 1/8 Mile
.9% to 1.44%
Each Foreclosed PropertyReduces by 1.8%
There Goes the Neighborhood
Factors Leading to Foreclosures
Factors Leading to Foreclosures
Personal Bankruptcy
Poor Loan Servicing
ARM Adjustments
Identity Theft
Mortgage Fraud & Illegal Flipping
Predatory Lending
Personal Bankruptcy
Poor Loan Servicing
ARM Adjustments
Identity Theft
Mortgage Fraud & Illegal Flipping
Predatory Lending
www.ftc.gov/idtheft
Roles of ProfessionalsRoles of Professionals
Loan OfficersRetail Loan Officer
Mortgage Broker
Loan Processors
Underwriters
Appraisers
Wholesale Lenders
Loan OfficersRetail Loan Officer
Mortgage Broker
Loan Processors
Underwriters
Appraisers
Wholesale Lenders
Regulation TrendsRegulation Trends
Licensing Mortgage Brokers
More Education
Licensing Mortgage Brokers
More Education
Chapter 2: Mortgage Basics for Real Estate Licensees
Chapter 2: Mortgage Basics for Real Estate Licensees
Impact of LiensImpact of Liens
Promissory/Mortgage Note
Mortgage/Deed of Trust
Promissory/Mortgage Note
Mortgage/Deed of Trust
Cost of Borrowing Money Factors
Cost of Borrowing Money Factors
Term of Loan
Time Value of Money
Assessing Borrower’s Borrowing History
Loan Amount
Term of Loan
Time Value of Money
Assessing Borrower’s Borrowing History
Loan Amount
ValueValue
TimeTime
Loan SourcesLoan Sources
Government-Assisted Programs
Private Sector Programs
Government-Assisted Programs
Private Sector Programs
Loan TypesLoan Types
Fixed-Rate Mortgage
(FRM)
Adjustable-Rate
Mortgage (ARM)
Fixed-Rate Mortgage
(FRM)
Adjustable-Rate
Mortgage (ARM)
Exotic LoansExotic Loans
Interest-Only (IO) Loans
Pay-Option ARMs
Negative Outcomes
Interest-Only (IO) Loans
Pay-Option ARMs
Negative Outcomes
Underwriting CriteriaUnderwriting Criteria
Income
Credit
Assets/Down Payment
Occupancy
Income
Credit
Assets/Down Payment
OccupancyPayment History
35%
Amounts Owed30%
Types of Credit10%
New Credit10%
Length of Credit History
15%
Alternatives to Traditional Requirements
Alternatives to Traditional Requirements
Full Documentation Loan
Lite Doc/Alt Doc Loan
No Doc Loan
Stated Income Loan
Seller Carryback Loan
Combinations
Full Documentation Loan
Lite Doc/Alt Doc Loan
No Doc Loan
Stated Income Loan
Seller Carryback Loan
Combinations
Role of Secondary MarketRole of Secondary Market
Primary Market
Secondary MarketSecuritization
Tighter Standards
More Losses
Primary Market
Secondary MarketSecuritization
Tighter Standards
More Losses
Manage Buyer Expectations
Manage Buyer Expectations
Lenders Who SpecializeMeet Buyers’ Needs
Use Reputable Lenders
Avoid Unrealistic Expectations
Lenders Who SpecializeMeet Buyers’ Needs
Use Reputable Lenders
Avoid Unrealistic Expectations
Chapter 3 Mortgage Fraud
Chapter 3 Mortgage Fraud
Tracking Suspected FraudTracking Suspected Fraud
Financial Crimes Enforcement Network (FinCEN)
Financial Institution Fraud Unit (FIFU)
Suspicious Activities Reports (SARs)
Suspicious Mortgage Activity Report (SMARt Form)
Financial Crimes Enforcement Network (FinCEN)
Financial Institution Fraud Unit (FIFU)
Suspicious Activities Reports (SARs)
Suspicious Mortgage Activity Report (SMARt Form)
Mortgage FraudMortgage Fraud
Define
Deception, False Facts
Collusion, False Premises
Lying
Types
Fraud for Housing
Fraud for Profit (& Business)
Define
Deception, False Facts
Collusion, False Premises
Lying
Types
Fraud for Housing
Fraud for Profit (& Business)
Penalties for FraudPenalties for Fraud
Conspiracy
One Time
Looking the Other Way
Examples
Lying on Loan Application
Lying about Purchase Price
Conspiracy
One Time
Looking the Other Way
Examples
Lying on Loan Application
Lying about Purchase Price
Red FlagsPossible Mortgage Fraud
Red FlagsPossible Mortgage Fraud
Shady Practices
Dual Contracts
Hidden Addenda
Silent Mortgage
Shady Practices
Dual Contracts
Hidden Addenda
Silent Mortgage
Red FlagsPossible Mortgage Fraud
Red FlagsPossible Mortgage Fraud
Inflated Appraisals
False Information on Applications
Rebates to Borrowers
Creative Financing
Inflated Appraisals
False Information on Applications
Rebates to Borrowers
Creative Financing
Fiction or Fact?Fiction or Fact?
Hypothetical Situation
Real-Life ExampleCasey Serin
Lived on Cash Back
Foreclosures
Fudge on Intent to Live
Etc.
Hypothetical Situation
Real-Life ExampleCasey Serin
Lived on Cash Back
Foreclosures
Fudge on Intent to Live
Etc.
Chapter 4Predatory Lending
Chapter 4Predatory Lending
Dilemma for Low Income& Poor Credit
Dilemma for Low Income& Poor Credit
Federal Housing Administration (FHA) Loans
Not Kept Pace
Lost Market Share
Growth of Subprime Market
Concentration of Credit Problems
Little or No Credit History
Federal Housing Administration (FHA) Loans
Not Kept Pace
Lost Market Share
Growth of Subprime Market
Concentration of Credit Problems
Little or No Credit History
Signs of Predatory LendingSigns of Predatory Lending
Subprime Not Always
Predatory
Legal Interests Not in Best
Interest of Borrower
Lack of Competition from
Prime Lenders
Subprime Not Always
Predatory
Legal Interests Not in Best
Interest of Borrower
Lack of Competition from
Prime Lenders
Subprime Lending Practices
Subprime Lending Practices
Higher Interest Rates Adjustable Rate Mortgages (ARMs)
Excessive Origination & Closing Fees
Prepayment Penalty Fees Binding Mandatory Arbitration (BMA)
Yield Spread Premiums (YSPs) as Kickbacks
Higher Interest Rates Adjustable Rate Mortgages (ARMs)
Excessive Origination & Closing Fees
Prepayment Penalty Fees Binding Mandatory Arbitration (BMA)
Yield Spread Premiums (YSPs) as Kickbacks
Steering & TargetingSteering & Targeting
Elderly
Racial Profiling
Immigrants
Those with Low Credit Scores
Flipping Loans
Unnecessary Products
Misleading or No Information about Loans
Elderly
Racial Profiling
Immigrants
Those with Low Credit Scores
Flipping Loans
Unnecessary Products
Misleading or No Information about Loans
Changing the ClimateChanging the Climate
Automated Underwriting Systems
More Regulation
Prohibit Appraisal Fraud
Consumer Education
Automated Underwriting Systems
More Regulation
Prohibit Appraisal Fraud
Consumer Education
HUD Borrower’s Bill of Rights
HUD Borrower’s Bill of Rights
Chapter 5Illegal
Flipping
Chapter 5Illegal
Flipping
Real Estate FlipsReal Estate Flips
Positive EffectsGentrification
Construction Jobs
Increase Tax Base
Negative EffectsLocals Forced Out
Tenants Displaced
Positive EffectsGentrification
Construction Jobs
Increase Tax Base
Negative EffectsLocals Forced Out
Tenants Displaced
Real Estate FlipsReal Estate Flips
Equitable TitleBeneficiary
Developer
Foreclosed Property Purchaser
Vendee in Installment Sale
Back-to-Back Closings
Equitable TitleBeneficiary
Developer
Foreclosed Property Purchaser
Vendee in Installment Sale
Back-to-Back Closings
Illegal FlippingIllegal Flipping
SchemesUse of Kickbacks
Fake Documents
Straw Buyers
False Identities
Real-Life Examples
SchemesUse of Kickbacks
Fake Documents
Straw Buyers
False Identities
Real-Life Examples
Signs of Illegal FlippingSigns of Illegal Flipping
Lender Fraud
Possible ActivitiesDeed Not in Seller’s Name
& Lender Unaware
Owned for Short Period
Seller Orders Appraisal
Rapid Increase in Value
Unusual Payments
Lender Fraud
Possible ActivitiesDeed Not in Seller’s Name
& Lender Unaware
Owned for Short Period
Seller Orders Appraisal
Rapid Increase in Value
Unusual Payments
Magnitude of FraudMagnitude of Fraud
All Parts of Country
Real-Life ExamplesConnecticut
Southern California
Twin Cities, MN
All Parts of Country
Real-Life ExamplesConnecticut
Southern California
Twin Cities, MN
Results of Illegal FlippingResults of Illegal Flipping
Neighborhood Responses
Housing & Urban Development (HUD)
Illinois Efforts
Neighborhood Housing Services of America (NHSA)
Georgia Real Estate Fraud Prevention & Awareness (GREFPAC)
Neighborhood Responses
Housing & Urban Development (HUD)
Illinois Efforts
Neighborhood Housing Services of America (NHSA)
Georgia Real Estate Fraud Prevention & Awareness (GREFPAC)
Federal & State Involvement
Federal & State Involvement
Financial Institution Fraud Unit (FIFU)
States w/ Most Reported FraudFloridaColorado & Illinois
Greatest ImprovementGeorgiaSouth Carolina
Financial Institution Fraud Unit (FIFU)
States w/ Most Reported FraudFloridaColorado & Illinois
Greatest ImprovementGeorgiaSouth Carolina
Fraud vs. Subprime Loan Rates
Fraud vs. Subprime Loan Rates
State (2005 Data)
MARI Fraud Ranking
Subprime Loan Rank
Florida 1 1
Utah 2 2
Georgia 3 5
Colorado 4 6
Illinois 5 4
Missouri 6 3
Texas 7 7
Protect Against Illegal Flipping
Protect Against Illegal Flipping
Know Market Use Competitive Market Analysis
(CMA)
Thoroughly Inspect
Know Extent of Repairs
Meticulous Documentation
Know Market Use Competitive Market Analysis
(CMA)
Thoroughly Inspect
Know Extent of Repairs
Meticulous Documentation
Chapter 6: Federal Protections
Chapter 6: Federal Protections
Fair Housing Act Equal Credit Opportunity Act (ECOA)
Home Mortgage Disclosure Act (HMDA)
Community Reinvestment Act (CRA)
Real Estate Settlement Procedures Act (RESPA)
Truth –in-Lending Act (TILA)
Fair Housing Act Equal Credit Opportunity Act (ECOA)
Home Mortgage Disclosure Act (HMDA)
Community Reinvestment Act (CRA)
Real Estate Settlement Procedures Act (RESPA)
Truth –in-Lending Act (TILA)
Educate Buyer BorrowersEducate Buyer Borrowers
HUD Web Site
HUD PamphletEnglish
Spanish
HUD Web Site
HUD PamphletEnglish
Spanish
Real Estate Settlement Procedures Act (RESPA)
Real Estate Settlement Procedures Act (RESPA)
Federally-Related Residential Loans
Disclosures at Time of Application Information BookletGood-Faith Estimate (GFE)
Affiliated Business Arrangement (AfBA)
Seller Cannot Require Certain Title Insurance Company
Federally-Related Residential Loans
Disclosures at Time of Application Information BookletGood-Faith Estimate (GFE)
Affiliated Business Arrangement (AfBA)
Seller Cannot Require Certain Title Insurance Company
RESPA (continued)RESPA (continued)
Prohibits Kickbacks
Disclosures at Settlement/Closing
Disclosure After Settlement/ClosingEscrow Account
Rules
Servicing Transfer Statement
Prohibits Kickbacks
Disclosures at Settlement/Closing
Disclosure After Settlement/ClosingEscrow Account
Rules
Servicing Transfer Statement
www.realtor.org
RESPA EnforcementRESPA Enforcement
Section 6: Servicing of Loans
Section 8: Anti-kickbacks & Unearned Referral Fees
Section 9: No Specific Title Insurance Company
Section 10: Limits on Escrow Accounts
Section 6: Servicing of Loans
Section 8: Anti-kickbacks & Unearned Referral Fees
Section 9: No Specific Title Insurance Company
Section 10: Limits on Escrow Accounts
RESPA EnforcementRESPA Enforcement
Injunctive Relief
File a Complaint with HUD
In Writing
Confidentiality
Injunctive Relief
File a Complaint with HUD
In Writing
Confidentiality
Truth-in-Lending Act (TILA)Truth-in-Lending Act (TILA)
Implemented by Regulation Z
No CoverageBusiness, Commercial, Agricultural,
Organizational Loans
More than $25,000 Loan
Student Loan Programs
Implemented by Regulation Z
No CoverageBusiness, Commercial, Agricultural,
Organizational Loans
More than $25,000 Loan
Student Loan Programs
Truth-in-Lending Act (TILA)Truth-in-Lending Act (TILA)
Right of Rescission
Trigger Items
PenaltiesFines
Imprisonment
Missing Information from Disclosure
Right of Rescission
Trigger Items
PenaltiesFines
Imprisonment
Missing Information from Disclosure
Home Mortgage Disclosure Act (HMDA)
Home Mortgage Disclosure Act (HMDA)
Implemented by Reg C
Monitors Reporting of Loan DataServing Community Needs?
Investments Attracting Private Investments?
Possible Discriminatory Lending Patterns?
Implemented by Reg C
Monitors Reporting of Loan DataServing Community Needs?
Investments Attracting Private Investments?
Possible Discriminatory Lending Patterns?
Community Reinvestment Act
( CRA )
Community Reinvestment Act
( CRA ) Regulations 12 CFR
Meet Credit Needs of Community
Loan Applicants AskedEthnicity, Race, & Color
Applicants Should Answer Honestly
Used to Monitor Compliance
Regulations 12 CFR
Meet Credit Needs of Community
Loan Applicants AskedEthnicity, Race, & Color
Applicants Should Answer Honestly
Used to Monitor Compliance
Tips for Real Estate Licensees
Tips for Real Estate Licensees
Know the Laws
Find Buyers EarlierHelp Find Appropriate
Lender
Manage Expectations
Know the Laws
Find Buyers EarlierHelp Find Appropriate
Lender
Manage Expectations
Reporting Appraisal & Mortgage Fraud
Reporting Appraisal & Mortgage Fraud
Federal Bureau of Investigation (FBI)
Federal Trade Commission (FTC)
Dept of Housing and Urban Development (HUD)
Department of Justice (DOJ)
Federal Bureau of Investigation (FBI)
Federal Trade Commission (FTC)
Dept of Housing and Urban Development (HUD)
Department of Justice (DOJ)
Recommended