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Some Things Never Change. The Game Of Lender “Hide And Go Seek” Continues.

I saw this spam email today, and I thought it is worth commenting on.

I have been pointing out in hundreds of investigations over the past few years, that the use of MERS and “table-funders” on the original mortgages /deeds of trust were inherently predatory under “Reg-Z.”

Table funding is generally defined as:

“A lending method employed when a loan originator does not have access to the money necessary to make loans and then hold them until it has enough to sell on the secondary market. As a result, the originator forms a relationship with a lender who provides the funds for closing and immediately takes an assignment of the loan. This is called table funding. Under regulations of the Department of Housing and Urban Development, table-funded loans must disclose service release premiums—profit received by the originator—on the loan closing settlement statement. Loans sold on the secondary market do not have to make those disclosures.”

The problem with table-funding is the fact that the “originator” is called the “lender” on the loan documents even though this entity did not provide the true source of funds for the loan, or rather had no “skin in the game.” These “fake lenders” had no reasonable expectation that the borrowers would perform on the loans, as the loans were often pre-sold or sold, on or at the time of closing. One of the benefits to originating the loans in the name of the “fake lender” was to allow the “fake lender” to avoid having to disclose “yield spread premiums,” or fees paid to the originator from the actual true creditor. Note the following language in the solicitation:

“We offer warehouse funding facilities for brokers and correspondents so you can close in your own name and make additional revenue[e.]”

“Our team purchases the property from you at closing and wires the full price so there is no waiting time.”

Now to gain access to a $1,000,000 warehouse line of credit, all you need is a “minimum net worth of $50,000″ and “Minimum monthly volume of $1,000,000.” Looks like the Pied Piper is at it again – “Calling all unemployed sharks sitting at home in your boxer shorts!” What this solicitation tells me is, “WorldNet Capital 1, LLC” is going out in search of sharks willing to call themselves “lenders.” “WorldNet Capital 1, LLC” is providing lines of credit up to $1,000,000 which it most likely is procuring from some hidden Wall St. entity. So far there looks to be at least 3-layers to this cake between the “investors” and the unsuspecting “borrowers,” to which each layer is making a tidy little undisclosed profit.

The following snippet is from the Federal Reserve website showing what needs to be disclosed to borrowers under “Reg-Z”  (take notice of the lower left hand corner):

“Charges imposed on the creditor for purchasing the loan that are passed on to the consumer.”

So let’s walk through a scenario. “Big Al” sees this ad and thinks – “hmm…I have a 4-wheeler, boat, trailer, and an 2001 Dodge Ram sitting in the garage. Yes! I’ve got a net worth of $50,000!” So “Big Al” sets up his new business, “Integrity Funding, LLC.” “Big Al” begins taking loan applications from family, friends, and neighbors telling everyone he’s now a “lender.” And of course, “Big Al” registers “Integrity Funding, LLC” with MERS. “Big Al’s” neighbor “Harvey” decides to take out a loan with “Integrity” because after all, they’re neighbors and he can trust “Big Al.” What “Big Al” doesn’t tell or disclose to “Harvey” in any of the paperwork is the fact that he will make a 2% kick-back on the $300,000 loan ($6,000.) So the closing date comes and “Harvey” sits down at the closing table with “Big Al” representing the “Lender – Integrity.” Immediately upon signing the documents, “WorldNet Capital 1, LLC” purchases “Harvey’s” loan by reimbursing the warehouse line of credit $300,000 and then popping a check in the mail to “Big Al” for $6,000.00. Within a few days, “Harvey” will receive a notice stating, “Integrity Funding, LLC is no longer your lender. The servicing rights to your new loan has transferred from Integrity Funding, LLC to ‘XYZ Servicing’ on behalf of ‘ABC Bank, N.A.'” And of course, all the internal transfers are concealed by MERS.

All of this was done, and is still being done today, for purposes of creating layers of plausible deniability and collecting undisclosed fees. The game of lender “hide and go seek” continues even today with newly originated loans.

Now I’m not saying that “WorldNet Capital 1, LLC” is doing anything illegal simply by my interpretation of this solicitation. I’m simply putting out another warning to consumers that it is important to seek information as to the true source of funds being used to fund your loan(s), and to question “Big Al” and those claiming to be the “lenders” on your loan documents. And of course, it always helps to get your answers in writing!

 

 

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