A Washington mortgage firm, its top two owners and several of its employees have been booted from the mortgage industry by state regulators for allegedly defrauding lenders and borrowers.
Ronald Burger and Dale Sage Gibbons have agreed to a 25-year ban from the mortgage industry and will pay $17,685 in state investigation costs and $14,589 to restitution to five victims, according to a written statement from the Washington Department of Financial Institutions.
Another former owner, Dwaine Klein, and seven loan officers agreed to settlements that included bans from the industry for up to 20 years and fines ranging from $1,000 to $7,500.
Klein was banned from the industry for 20 years.
None of the owners or employees admitted any wrongdoing in the agreement with the state.
A two-year investigation uncovered a pattern at Century Mortgage of employees and owners overvaluing properties and falsifying papers to defraud lenders and borrowers with inflated property values, phantom second mortgages and false down payments, the agency said.
“Century Mortgage created a scheme to sell low home values in the Spokane area for dramatically inflated prices,” Chuck Cross, Acting Division Director and Enforcement Chief of the Department for Financial Institutions, said in the statement.
“Not only were consumers harmed in these transactions, but lenders were duped into making large loans on the properties through the use of fraudulent appraisals and phantom second mortgages,” Cross said.
According to the state the scam targeted borrowers with poor credit, bankruptcies and outstanding judgments against them. Without the buyers knowledge Century’s representatives submitted false personal checks and business checks to support homebuyers’ loan applications in a bid to win approval of the loans, the state said.
“With these fictitious ‘phantom’ payments or gifts, borrowers with marginal credit could qualify for much larger loans,” said Mark Thomson, director of the department’s Division of Consumer Services.
Century made illegal fees off the top of each inflated mortgage while borrowers ended up purchasing properties for far more than the original selling price or actual value, Thomson said.
The settlements allow the defendants to avoid a lengthy trial, the state said.
But Burger and Gibbons also face federal charges. They have been indicted on wire fraud and conspiracy charges, according to court records filed in U.S. District Court for the Eastern District of Washington.
Trials are pending. The state also said the FBI was involved in the investigation and the department “will continue to assist them with investigative and analytical support,” the department said.
Lawyers for Burger and Gibbons could not be reached.
These loan officers also signed the agreement with the state:
- Gene Arthur Taylor, 20-year ban.
- Mark Hodge, 10-year ban and a $1,000 fine.
- Jon Steven Webb, 15-year ban.
- David Burger, 15-year ban.
- Curtis Orvik, 8-year-ban and a $7,500 fine.
- Michael Deasy, 8-year ban and a $5,000 fine.
- Scott Tollefson, 8-year ban and a $5,000 fine.
Lawyers for the loan officers told The Spokane Spokesman-Review their clients were innocent but paid the fines to avoid going to trial.
