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

1. How to recognize and avoid trouble

2. About Mike Lasater
Licensed loan officer
with over 10 years of
experience
Committed to the
financial well being
of our clients

3. Course Objectives
 My Goals:
 Inform you of recent fraudulent activities and discuss
ways to protect yourselves and your clients
 Present to you the latest landmark case of fraud and
explain how it came to the attention of the CFPB
 Demonstrate how to take advantage of CFPB policies
and use them for the benefit of your clients
 Create awareness of the proper way for lenders to
follow CFPB guidelines – How lenders get paid

4. Fraud
/frôd/
 Noun: Wrongful or criminal deception intended to
result in financial or personal gain.
 A person or thing intended to deceive others, typically
by unjustifiably claiming or being credited with
accomplishments or qualities.
 Synonyms: cheat - deceit - deception - swindle -
humbug – fake

5. Consequences of fraud
 Consumers suffer
 Impact on our industries
 Impact on our economy
 Individual consequences
 Negative impact on our community

6. Who investigates fraudulent
activity in our industry?
 CFPB (enforces RESPA)
 Utah Department of Commerce
 Division of Real Estate
 FBI
 FTC
 Prudential Regulators

7. Fraud and Discrimination
 Regulated and enforced by
 CFPB
 FTC
 HUD
 DOJ
 Division of Real Estate

8. Barney Frank and Chris Dodd
 Financial Services
Committee Chairman
 Senate Banking
Committee Chairman

10. The Loan Originator Compensation Rule
Took effect April 1st 2011

11. THE CFPB
 Enforces ECOA/Reg B
 Committed to fighting unlawful, discriminatory and
fraudulent practices and creating a fair marketplace for all
consumers
 Creditors: ““…a person who, in the ordinary course of
business, regularly participates in the decision of whether or
not to extend credit” (12 C.F.R. §1002.2(l)). For the purposes
of ECOA’s prohibitions against discrimination and
discouragement, the definition of creditor also includes
“ …a person who, in the ordinary course of business,
regularly refers applicants or prospective applicants to
creditors, or selects or offers to select creditors to whom
requests for credit may be made” (12 C.F.R. §1002.2(l)).

12. CFPB and Prudential Regulators in
accordance with the FTC
 Depository Institutions with more than 10 billion
dollars in assets are primarily regulated by the CFPB
 Depository entities with less than 10 billion in assets
are under regulation by the Prudential Regulators,
however they ultimately report to the CFPB
 The FTC used to function as the primary federal
regulator for non-depository institutions but has been
somewhat replaced by the CFPB. They now operate in
coordination with them.

13. From violation to punishment
 Violation is committed by one or more creditors
 Reported to the BOR or Division of Real Estate or The
Utah Department of Commerce
 Escalated to CFPB, FTC or Prudential Regulators
 Investigated and found to be discriminatory
 Referred to the Assistant Secretary of HUD
 Conciliation agreement signed by Carol Galante
 Referred to the DOJ
 Referred to the Attorney General
 (12 C.F.R. §1002.16(b)(3)).

14. HUD Assistant Secretary
 Carol Galante

15. Richard Cordray – CFPB Director

16. The Wrong Way for a Builder to Profit From
Residential Mortgages
By Paul Taylor

17. Chapter 1
 Kickbacks for referrals violate RESPA

18. Overview
 Home builder wants to profit from mortgages
 Home builder makes false mortgage company
 Receives referral fees through false company

19. Paul Taylor Homes – Texas
 Created false mortgage companies: Stratford
Mortgage Services and PTH Mortgage
 Benchmark Bank and Willow Bend Mortgage actually
performed the lender function
 Taylor receives payment through a “service agreement”
 FDIC becomes aware of the illegal activity
 Refers the case to the CFPB

20.  Referral fees violate RESPA
 CFPB enforces RESPA
 Home builder is fined $118,194.20 – his total kickback
 Fine goes to the United States Treasury because it was
found that consumers were not harmed by this practice

21.  CFPB: “Harm caused by kickbacks hurt
Competition, causes consumers to potentially
pay higher price at settlement

22. Richard Cordray
CFPB Director
• “The CFPB will continue to take action
against schemes designed to let service
providers profit through unscrupulous
and illegal business practices.”

23. How Loan Officers Get Paid
How to Read a Ratesheet

24. The purpose of LOCR is:
• To prevent incentives to “up-charge” consumers on their
loans. The final rule generally prohibits loan originator
compensation based upon the profitability of a
transaction or a pool of transactions.

25. The proposal was designed to
facilitate consumer shopping,
enhance consumer decision-making,
and preserve consumer choice
and access to credit.

26. Where compensation is set?
 Keep rates low to stay competitive
 What to do with overage
 When is it beneficial to pay points
 Offering a lender credit

27. Utah based mortgage company is the target in first
CFPB investigation on record

28. L.O.C.R
 Loan Originator Compensation Rule: April 6 2011
 Prohibits mortgage companies from motivating
employees to steer borrowers into more expensive
mortgages
 Requires companies to properly retain compensation
records
 Transferred to CFPB on July 21, 2011
 Why would a company participate in an illegal
practice?
 Market conditions when agreements were put in place

31. Mortgage Companies React
 Point Banks
 Profitability accounts (LOP)
 Overage accounts
 Marketing accounts
 Bonus and Incentive accounts

32. Recent Violation and Action
 1100 bonuses paid to 215 loan officers
 9400 borrowers who received a loan from any officer
who received a bonus will receive a check
 Total amount paid to borrowers: $9,232,896.00
 Additional $4,000,000 in civil penalties and fines
 Referred to CFPB by investigators with the Utah
Department of Commerce
 Working in accordance with the Division of Real
Estate

33. When did this all take place?
 Dodd-Frank Wall Street Reform and Consumer
Protection Act – July 21, 2010
 January 2011 – Mortgage companies are put on notice
of the new rules and given time to comply
 Loan Officer Compensation Rule effective April 6th
2011
 QM takes effect January 10, 2014
 Safe Harbor
 Qualified Mortgage rules

35. 10 minute Break

37. Double contracts
 What does that mean?: executing two or more purchase
agreements, one of which is not made known to the
prospective lender or loan funding entity.
 Can a last minute “fix” be considered a double contract?
 Any repair or alteration in the contract must be completed
prior to signing
 Seller Concessions – Money left on the table
 Carpet/Paint allowances
 Escrow for repairs 1 ½ times bid amount held in escrow

38. Really!!??

39. Art Intellect – Salt Lake City
 Patrick Merrill Brody and Laura A. Roser
 Mason Hill and Virtual MG
 Took 2.5 million from 75 investors
 Promised returns of 30%
 Offered to purchase distressed property, rehabilitate and
find tenants
 Money went to operating expenses, commissions and lavish
personal items i.e. Rare books, trips, houses, cruises,
personal cook, Cadillac Escalade for the defense atty.
 Some investor money went to initial investors as repayment
(Ponzi scheme?)

40. Online scams targeting renters
 Agent Identity Theft – Fraudster finds a listing in the
classifieds represented by an agent. Fraudster steals
agent identity and sets up phony phone and email
address and re-lists the property elsewhere at a
reduced price. Fraudster has potential renter drive by
and look in windows to make sure the home is
acceptable and then asks for money to be wired.

41.  Good rental – Great price: Landlord is
out of town and asks for the money to
be wired somewhere far away

42.  Find a house, sign a lease and give the
lock smith first month rent and
security deposit

43. Scam email red flags
 There are commonalities with all rental scam emails. Below are some
tips when dissecting a rental scam email.
 Does the email start out with Sir / Madam?
 Are there misspellings in the email?
 Are there character mistakes in the email? i.e Hello,my nameis Susie.
 Is there excessive capitalization?
 Does the email reference God, UK, Cashiers Check, Doctor, Nigeria,
Reverend, etc.
 Is the email from a free email provider. i.e gmail, yahoo, aol, hotmail.
 Does the email refer to another person or agent?
 Does the email reference wanting to move in site unseen?
 From rentscams.org

44. Wired funds are being stolen!!
Notify borrowers of potential new scam
Urgent warning: Customer’s wired funds are being stolen!
GuaranteedRate isaware of a new email scamtargetingborrowerswiringmoneytotitle
companies. We have receivedmultiple industryreportsof borrowerswhohave received
“doctored”emails,claimingtobe from title companies. Thieveshave interceptedemail
communicationsandare changingwiringinstructionstodivertfundstoa fraudulentaccount.
This scam or wire interceptionistargeting attorneys and title companies,and the “cash to
This issue is not on the lenderside,and has notclose” componentof the transaction.
impactedany GuaranteedRate borrowers at this time.
In order to prepare our company, we ask that you followthe best practice of instructingall
borrowers to call theirclosing agent confirmingwire instructionsbefore initiatingfunds.

45. Other common schemes and scams
 House theft
 Affinity fraud
 Reverse mortgage fraud

46. Conclusion
 How to detect if there is foul play
 How to avoid being caught up in something that could
end in trouble.
 How to advise our clients
 Stick to your training and trust your instincts

47. Conclusion