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$500k Fine, License Revocation for Calif. Co.

Washington files statement of charges against Paramount Equity Mortgage

July 23, 2008

By MortgageDaily.com staff

A California-based mortgage company is being kicked out of Washington because, the state claims, of deceitful advertising, faulty disclosures and unlicensed originators. The company, which collected average fees of more than $5,100 per loan, was criticized for failing to include required information in sponsored search engine ads.

Washington's Department of Financial Institutions announced Tuesday that it intends to revoke the license of Paramount Equity Mortgage Inc. In addition, the state is issuing a $500,000 fine against the company, demanding nearly $10,000 in examination and investigation fees and requiring restitution for borrowers.

Also included in a statement of charges are Hayden D. Barnard, Paramount's president; Mathew J. Dawson, designated broker; and John J. Walker, chief financial officer. Dawson's loan originator license is being revoked.

According to the state, even though Paramount charged discount points, the interest rates on loans it provided were not reduced. The broker also collected underwriting fees it did not earn.

In addition, Paramount failed to provide some required disclosures while making state and federally-required disclosures in a deceptive manner.

The actions by the department were the result of an examination it conducted on Paramount, founded in 2004 and based in Roseville, Calif.

The company operates both as a mortgage broker and as a mortgage banker. It maintains warehouse lines-of-credit with Countrywide Warehouse Lending and First Collateral Services, according to the statement of charges filed Monday.

Paramount closed more than 1,700 mortgages last year, of which 30 percent were brokered and 70 percent were closed utilizing the warehouse lines, the department said. Fees collected on those loans totaled $8.7 million, or an average of $5,118 per loan.

"Paramount failed to make proper disclosures in almost every loan we reviewed," Deb Bortner, a director for the department, said in the announcement.

Paramount aired about 25 different radio spots on 29 Washington radio stations last year.

While the state does allow use of the terms "mortgage bankers" and "mortgage banking," in the radio commercials, Barnard referred to the company as a "mortgage bank."

Paramount also allegedly advertised adjustable-rate mortgages as fixed-rate; falsely claimed to have exclusive access to low rates; and falsely offered free appraisals, the statement of charges indicated. A $500 rate and fee guarantee advertised by the company failed to include details about the terms of collecting.

The company was also criticized for contextual ads it ran with Google that touted the guarantee, free appraisals and an 80 percent approval rate but failed to include its full licensed name, license details and terms of the guarantee.

It also should not have suggested mortgage rates were at historic lows without having adequate books and records required to substantiate such claims, the department said.

Paramount was accused of moving erroneously disclosing its fees on Good Faith Estimates and, in collusion with its designated settlement agent, Ticor Title, hiding its fees on the HUD-1 Settlement statement.

The company also allowed 16 unlicensed originators to originate 52 Washington loans, the state said.

In The Matter of Determining Whether there has been a violation of the Mortgage Broker Practices Act of Washington by Paramount Equity Mortgage, Inc., et al
State of Washington, Department of Financial Institutions, Division of Consumer Services (No. C-07-405-08-SC01)

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