A $15 million mortgage fraud judgment has driven a Virginia-based mortgage company into bankruptcy liquidation. Among creditors listed in the bankruptcy filing are a number of failed wholesale mortgage lenders.
East West Mortgage Co. filed a voluntary chapter 7 bankruptcy petition in the U.S. Bankruptcy Court, Eastern District of Virginia, on March 4. Chapter 7 bankruptcy involves liquidation of the business.
The Vienna, Va.-based broker, which was founded in 1986 by President and Chief Executive Officer Doug Bui, listed its biggest creditor as 1st Mariner Bank in the filing. Two claims aggregating $15 million were included from 1st Mariner.
First National Bank of Arizona, which shut down its wholesale lending division in August 2007, was also listed as an unsecured creditor for $432,000.
Another unsecured creditor listed for $370,000 was Green Point of Washington, D.C. It wasn't clear, however, whether the company was the same as Novato, Calif.-based GreenPoint Mortgage -- which was also shut down last August.
Wholesaler WMC Mortgage, which ended operations last year, was listed as a $109,927 unsecured creditor.
Other mortgage-related unsecured creditors included IndyMac Bank with claims of $706,220 -- apparently from another judgment -- and Just Mortgage, with a claim for $324,800.
Bui was also listed as a creditor. He was owed $137,124 -- though he was paid $500,000 during the past year. Bui owns 84 percent of East West while a family trust owns the remainder.
Total claims from all unsecured creditors were $18.2 million, though total assets were listed at just $180,962. The number of unsecured creditors was less than 50, and there were no secured creditors.
Baltimore-based 1st Mariner sued East West in the U.S. District Court of the District of Maryland seeking a $15 million judgment, including more than $10 million in punitive damages.
1st Mariner had done business with East West since 2004 through its First Mariner Bank Mortgage. The company, which exited wholesale lending in July 2007, alleged East West sold it $5.9 million in fraudulent mortgages -- leading to losses in excess of $5 million.
Among fraudulent file documents were doctored verifications of deposit, fake verifications of employment and fabricated letters of credit, 1st Mariner alleged. But many of the borrowers involved in the transactions had no idea mortgage fraud had been committed.
The bad loans defaulted soon after closing, and First Mariner claimed it was forced to repurchase them from the investors
East West reported employing more than 400 people in 2005. The company said it funded $1.2 billion during 2004. Gross income went from $39.5 million in 2005 to $15.9 million last year.