Arizona regulators are shutting down a mortgage company with over 80 branches because of extremely lax hiring practices, poor record keeping and incompetent management.
Eagle First Mortgage consented to the Arizona Department of Financial Institutions' order to surrender its mortgage broker license and that of all of its branches, which -- according to the state -- number around 82.
The department's investigation of Eagle around mid-2006 found that the company was insolvent, failed to adequately reconcile their checking accounts and provide documentation to support financial status of such accounts, and engaged in over 80 illegal acts, including some relating to Truth-in-Lending laws, according to the order.
The brokerage will officially be closed on March 14, according to a statement posted on Eagle's Web site by its chief executive officer, David Sanchez.
"As most people know I have agreed to shut down Eagle," Sanchez said in the statement. "The Department of Financial Institutions was gracious in allowing loans not yet closed to continue closing so as to not hurt the borrowers."
Sanchez provided a written statement to the department, citing that Eagle has not accepted new business since the mandated date of Jan. 31, 2007.
The order cited over 80 instances of illegal practices by Eagle.
Among the law violations, Eagle did not conduct, or failed to record the date of, minimal reasonable background checks before hiring employees. In some cases, it did not consult with applicants' most recent employer, did not inquire applicants about their qualifications and competence, and failed to obtain signed statement attesting all felony convictions on at least 95 employees. Eagle also hired some without first obtaining a completed and signed application, and, with 62 employees, did not further investigate their derogatory credit reports, according to the order.
Eagle failed to ensure that certain responsible individuals maintained a position of active management and were knowledgeable of Arizona activities, did not maintain records of all executed loan applications, and excluded their name and license number within text of advertising or business solicitations, the department added.
Additionally, Eagle continued to engage in illegal practices after agreeing to take corrective action and paying a civil penalty that the department issued against it in early 2004. After paying the penalty, Eagle paid almost $2.5 million in compensation to unlicensed, independent contractors, including companies owned by branch managers. Some of the compensation did not have payroll taxes withheld or go through payroll services.
The brokerage illegally transferred or assigned branch office licenses, the department continued, citing that Eagle originated loans for branches whose license was pending. On a loan application, Eagle listed its corporate address and said the information from a borrower was taken "face to face" when the borrower actually lived a significant distance away.
On some loan transactions, Eagle did not disclose yield spread premiums or real estate broker fees it collected while acting as a mortgage broker, and it failed to issue preliminary Good Faith Estimates and Truth-in-Lending disclosures, the state said.
The department also said Eagle gave borrowers -- who had already paid for an appraisal report -- a 90-day limit to request, transfer or return an appraisal report. The order also cited instances in which the same borrowers who had received a loan applied for a second loan within less than a month to two months and their income differed significantly or the place listed as the primary residence in both loans was different. Eagle also had borrowers sign applications with blank spaces without first obtaining their written authorization to complete the blank spaces.