In recent days, federal officials have launched an all-out effort to halt the fraud and corruption plaguing the nation's bank mortgage industry. On October 9, 2012, the Federal Trade Commission ("FTC") filed three separate federal court lawsuits against allegedly phony mortgage-relief companies. These suits accuse the companies of having engaged in deceptive business practices by falsely assuring struggling homeowners that they could save their homes from foreclosure, charging thousands of dollars in up-front fees, and then providing little or no actual assistance. On the same day, the U.S. Attorney General, the Federal Bureau of Investigation ("FBI"), and the Department of Housing and Urban Development ("HUD") announced the results of the Distressed Homeowner Initiative, a year-long, coordinated, multilevel investigation targeting predatory foreclosure-rescue and mortgage-modification schemes. Meanwhile, on another front, the U.S. attorney's office in Manhattan filed a mortgage fraud lawsuit against Wells Fargo, accusing the major bank of having engaged in improper underwriting of home loans for over a decade. The following day, October 10, the FTC announced that it had reached a settlement with Equifax on allegations concerning the improper sale of information on late borrowers. The FTC alleged that Equifax had sold more than 17,000 lists of consumers who met specific criteria, such as being late on their mortgage payments, to Direct Lending Source, which, in turn, had sold the lists to various third parties.
A major source of ammunition in these federal efforts against mortgage fraud is the newest provision of the FTC's Mortgage Assistance Relief Services ("MARS") Rule, which was issued in November 2010. See 12 C.F.R. § 1015.5. This Rule prohibits mortgage-relief companies from collecting any fees until the homeowner has a written offer from his or her lender or servicer that the individual deems acceptable. Mortgage-relief services that charge advance fees to consumers may be held civilly or criminally liable for violation of the MARS Rule. See id. § 1015.10.
Notably, attorneys are generally exempt from MARS Rule prohibitions. Id. § 1015.7. To qualify for exemption from all MARS disclosure rules except the advance-fee ban, an attorney must satisfy three conditions: (1) The attorney must be engaged in the practice of law; (2) the attorney must be licensed in the state where the consumer or dwelling is located; and (3) the attorney must comply with state laws and regulations governing attorney conduct relating to the MARS Rule. Id. § 1015.7(a). To qualify for an exemption from the ban against advance fees, the attorney must also meet a fourth requirement: Any up-front fees collected must be placed in a client trust account, and the attorney must abide by state laws and regulations governing such accounts. Id. § 1015.7(b).
Broadly speaking, the sweeping actions just taken by various federal agencies may signal a general change in attitude from one that is "procreditor" to a more lenient "prodebtor" perspective. Such a shift in the law could potentially benefit debtors seeking relief from seemingly harsh creditor-imposed penalties of all types.
It should also be noted that the FBI's announcement of October 9, 2012 emphasized the role that unscrupulous attorneys have played in perpetrating mortgage fraud upon desperate consumers. In that announcement, the agency specifically stated it has "noticed a disturbing trend among these [distressed homeowner fraud] cases—an increasing number of lawyers playing primary or secondary roles in the fraud." Distressed Homeowner Initiative: Don't Let Mortgage Fraud Happen to You, http://www.fbi.gov/news/stories/2012/october/don't-let-mortgage-fraud-happen-to-you. According to the FBI, phony mortgage modification services have attempted to circumvent the MARS Rule advance-fee ban by "using attorneys—which by itself adds an air of legitimacy to their fraudulent schemes—and calling their upfront fees 'legal retainers.'" Id.
The FBI's singling out of the attorney exemption to the MARS Rule may be taken as a sign that the federal government intends to take steps to close this "loophole" by imposing more stringent requirements on attorneys engaged in the practice of assisting financially troubled homeowners. Attorneys for consumer-debtors should take care to stay abreast of any new developments in this regard. At a minimum, the imposition of more stringent federal regulations that limit, or even outright prohibit, the collection of advance or retainer fees from clients who may wish to obtain a modification of their underlying home mortgages would significantly impact the risks associated with the pursuit of such cases and the maintenance of client trust accounts.
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For reasons of its own in June 2012, the IRS announced a much-needed set of streamlined filing procedures for non-resident U.S. taxpayers, to go into effect on September 1, 2012. The procedures apply to nonresident, non-filer taxpayers, including U.S. citizens who are dual citizens. In making the announcement, the government explained that there was a population of innocents abroad who could be relieved of past failures to file federal income tax returns or FBARs (Form TD F 90-22.1) who, "have recently become aware of their filing obligations and now seek to come into compliance with the law."
The idea is laudable because there are indeed large populations of people overseas who hold a U.S. passport but have never given serious thought to their duties to the IRS. For example, it is common for residents of the Bahamas to make the short trip to the United States to have their babies delivered. Likewise, many Mexicans hold U.S. passports because they are children of a U.S. citizen, but were born in Mexico. As is the case wherever a child is born abroad to a U.S. citizen, the parent can go to her closest American embassy or consulate to apply for a "Consular Report of Birth Abroad of a Citizen of the United States of America" (or CRBA) to document the claim to U.S. citizenship at birth. If the consulate or embassy concludes the claim is true, it will approve a "CRBA application" and the State Department will issue a CRBA (Form FS-240) in the name of the child. That clears the path to getting a U.S. passport. It's easy, so it's done often. So far, so good. Now assume the flap over FBARs and the recent spate of Intergovernmental Agreements under FATCA sets off a storm of interest in the newspapers of Mexico or the Bahamas and suddenly a large population is tipped off to the situation. The poorest will likely do nothing, given the complications they perceive. Some might learn of the Streamlined Program,1 others might not. Some will turn their backs on the issue and assume they are safe from the IRS. Yet others will look at the program and see if it might solve the problem they perhaps never thought they had. Now let's look at the demands, not from the formal side, but from the questionnaire the IRS demands the taxpayer fill out. This is where the major lumps in the program are. If the taxpayer meets the tests below he can purge himself by filing three years of federal income tax returns (plus all the attachments) and six years of FBARs, but if the taxpayer did any of the following he is kicked out of the program:
These screens are too tight. Rather than bore the reader with tedious objections, I propose some questions:
“How can the Delaware LLC be filed without the owner’s name being listed on the public record?” That is the most popular question that I hear on a daily basis. The purpose of this post is to spell out exactly how it is possible to file a Delaware LLC and how to protect your ownership if you file and decide not to list your member’s names on your formation documents.
Frank Dosebio, director of business filings at Evedex LLC says: "The only document required to be filed in Delaware to create the LLC, is the Certificate of Formation. Unlike other states, Delaware requires very little information to be made public in order to form an LLC. The Certificate of Formation filed with the Delaware Secretary of State is required to contain only two articles: the name of the Delaware LLC and the address of the Delaware LLC’s registered office and the name and address of the Delaware LLC’s registered agent in Delaware. At Evedex LLC we serve as registered agent for more than 3000 companies. In Delaware, members and managers are not required to be named in or to execute the Certificate of Formation. Preparation, execution and filing of the Certificate of Formation must be handled by an authorized person or entity such as Evedex LLC. An authorized person is an individual or entity that forms an LLC on behalf of the members by filing the necessary formation documents with the Delaware Secretary of State and providing the Certified documents to the members. Normally, the authorized person is the LLC’s registered agent or attorney. The powers of the authorized person are just to execute the filing of the document with the Delaware Division of Corporations. Once the document is filed the authorized person will deliver the LLC to the initial member(s). The legal instrument that releases the LLC to the initial member(s) is called the “Statement of the Authorized Person”, this statement is prepared and signed by your agent and is not provided to the State of Delaware. It is NOT required to be filed publicly in Delaware. The next question we tend to get from Frank is “How is the ownership shown in the LLC if the public record contains no names?” Frank Dosebio Evedex LLC: "Well Jorge, the fundamental terms of an LLC’s ownership, operation and management are set forth in its LLC agreement. An LLC agreement can be a written document or merely an oral understanding. A written agreement, however, is typically used because it memorializes the understanding and agreements of the members, which, in the event of a later dispute or misunderstanding (or the unfortunate possibility of litigation), is an invaluable protection in the interest of all parties involved. Although each LLC agreement is different, an LLC agreement will generally set forth certain fundamental terms such as:
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