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Actions Against Oregon Violators

Four companies face orders, fines

August 14, 2008

By staff

Oregon is taking action against four mortgage companies over allegations of mortgage fraud, incomplete licensing and inadequate supervision of originators.

A cease-and-desist order was issued against Allegiance Mortgage LLC, the Oregon Department of Consumer and Business Services said in a statement yesterday. In addition, the mortgage broker's lending license was revoked and the company, along with owner Brian Fallini, was fined $50,000.

Loan originators at Springfield-based Allegiance allegedly submitted fraudulent packages to wholesale lenders, prompting a joint investigation by the Federal Bureau of Investigation and Oregon's Division of Finance and Corporate Securities. The investigation led to the indictment of two employees on federal wire fraud charges. Subsequently, Mark Harless was convicted and Hein Williams entered into a diversion program.

Fallini, who was permanently banned from owning a mortgage company and working in the industry, was fined $35,000 for overstating his assets to the state -- though the fine was suspended as long as he doesn't violate any provision of Oregon Mortgage Lending Laws.

The license of Diamond Financial Mortgage Group of America Inc. was revoked by the state's Division of Finance. An order was previously issued against the company in 2006 and $90,000 in civil penalties were assessed because of lending law violations.

The state subsequently found that co-owner Kevin Covington used a third party to secure a mortgage for a denied applicant and submitted falsified documents. In addition, Covington's partner in the Tigard-based company, William Tieman, allegedly notarized closing documents without viewing the signing of the documents.

The actions led to new fines of $7,500 for Diamond's co-owners and reinstatement of the remaining $84,000 penalty from the 2006 order.

Portland-based 1st American Inc. and owner Eric Otterholt were ordered to cease and desist from unethical practices and failing to supervise. The action was prompted by an originator at the company who provided inaccurate loan documents that indicated more funds were available than what actually occurred. More than $26,000 in fines were suspended as long as Otterholt fully complies with the terms of the order and commits no further lending law violations.

A fourth company, Pacific Crest Funding Inc., faced a cease-and-desist order for failing to supervise one loan officer and failing to ensure that its originating co-owner, Dean Schmidt, completed required training. The Eugene-based company was fined $20,000, though $10,000 was suspended as long as no further violations occur. Schmidt was fined $5,000, but $4,000 was suspended.

The department said five mortgage lending licenses have been revoked so far this year, while 30 enforcement orders have been issued as a result of additional resources it has begun using. Pending investigations number 60.

Senate Bill 1064, passed by this year by Oregon's legislature, took effect in May and gives the department expanded enforcement over loan originators, the statement said.

The department also said it adopted new, stricter rules in May to prevent misleading mortgage advertisements.

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