twitter linkedin
facebook google+
Search:

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News

 

Mortgage News

HOT Topics

production

servicing

compliance

legal

fraud

secondary

jobs

appraisal

site map

www.loan-academy.com/
Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.


Mortgage Investors Deceived by Servicer, Lender

NH report analyzes regulatory failures

April 11, 2011

By MortgageDaily.com staff


A new report from the State of New Hampshire looked at how a hard-money lender and a mortgage servicer colluded to carry out a Ponzi scheme by misleading investors, auditors and regulators.

Financial Resources & Assistance of the Lakes Region Inc. was incorporated in New Hampshire in May 1989 by Scott Farah, according to findings of fact released Monday by New Hampshire Secretary of State William Gardner. While the company initially had four directors, including Farah's father, by 1992 Farah was the sole director.

The company had been licensed since 1997 in New Hampshire as a first- and second-mortgage banker and mortgage broker.

In June 2007, the company registered the trade name "Financial Resources National." Later that year its corporate name was changed to Financial Resource National Inc., and that was followed in October 2008 to another name change -- this time to Financial Resources Mortgage Inc.

Financial Resources acted as a hard-money lender, obtaining capital from individual investors who were solicited by "false, misleading and deceptive" direct mail marketing. Once an investor called, they were given access to a Web site with data about available loan packages. Many of the victims were lured by "extremely persuasive" informational packages.

Investor-victims who performed varying degrees of due diligence found no regulatory actions against Financial Resources or complaints about the company online.

Their investments ranged from $200,000 to $2 million. Most said that they trusted Farah -- who told some to fund their investments from self-directed IRA accounts.

Investors were promised one year's interest before they closed the loan -- believing that the up-front fee was funded through points. But the funds were actually taken from other investors in a classic Ponzi scheme.

They were provided with monthly reports on the loans.

Also in on the scheme was CL and M Inc., which was incorporated in Nevada in June 2005 by Donald Dodge. CL&M's was a mortgage servicer, though it never registered with New Hampshire as is required by law.

According to the state, CL&M served as a "conduit for lender-advanced funds into what proved to be non-earmarked, commingled accounts that became the Ponzi scheme."

In June 2005, CL&M provided Farah with a $10 million line of credit -- though borrowed funds eventually exceeded $20 million. Funding for the line was taken from the lender-advanced funds accounts -- which were supposed to be segregated.

Financial Resources hid the illegal activity from its auditors through two sets of books by portraying the funds from the line of credit as income instead of liabilities. When the auditors contacted Dodge, he didn't let on that the money actually came from credit lines.

"It was all an illusion," Farah reportedly testified.

Another company, Dodge Financial Inc., was incorporated in New Hampshire during 1989 to simultaneously originate a loan with multiple lenders. And another firm, Greatland Project Development Inc., acted as a mortgagee when multiple investors were involved in a loan.

The New Hampshire Department of Justice was first tipped off about possible criminal activity in October 2005 then again in May 2006. But, according to the report, no action was taken.

Things began to fall apart in 2007, as subprime lending disappeared and borrowers were unable to refinance their balloon payments.

As the situation grew more desperate, Farah leaned on prior investors to put up more dough.

Both Financial Resources and CL&M stopped doing new business on Nov. 6, 2009, and closed down. Involuntary bankruptcy followed two weeks later for both firms.

Farah was sentenced in January to 15 years in prison, while Dodge was sentenced to six years.

next story

back to current headlines


The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.



Financial Regulation News | Mortgage Regulations
Bank and mortgage regulators, regulations and regulatory actions. Coverage of regulatory legislation and testimony.

www.mortgagebranchmanagerjobs.com
Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.


Servicing News | Servicer Ranking | Delinquency Statistics
Stories about mortgage servicers, delinquency and f o r e c l o s u r e s. Coverage of servicing lawsuits and loan servicing technology.


Corporate Mortgage News
M e r g e r s, a c q u i s i t i o n s and private and public offerings. Other corporate activity including executive appointments, bankruptcies name changes.


Logout forgot
password?

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter

MBS

mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders