Mortgage Daily Logo

Fraud Lawsuits Tied to Net Branch Collapse

Mortgage News

Mortgage Daily

                                                 January 19, 2008

The collapse of a New Jersey-based net branch has some branch managers considering a class action lawsuit. In a lawsuit by one of its wholesale lenders, the company is accused of submitting more than $2 million in fraudulent loans that resulted in more than $1 million in losses.

Mid Atlantic Capital LLC is shutting down.

“It was official at 9:30 a.m. [Thursday],” the manager of one of Mid Atlantic’s New Jersey branches, who ask not to be identified, told MortgageDaily.com. He was referring to an e-mail sent to branch managers by Don Forum, owner of the company.

The manager said the fact that Mid Atlantic was in trouble “was noticeable a week or two weeks ago. Checks were bouncing. Basically,” he added, “everybody got screwed.”

He and his five loan officers, he said, were owed “a decent amount.”

The manager of a Florida branch, who also requested anonymity, told MortgageDaily.com that at 4:30 Wednesday afternoon, Forum told him that he “needed another 24 hours” to try to rescue his company.

“Obviously, he didn’t make it,” he commented.

He explained that, including himself and his 13 loan officers, “We are down over $30,000.”

The Florida manager also noted that branch managers are considering a class action law suit over lost wages and mismanagement of funds.

“Corporate people,” he added, “tried to do a number of things that caused them to go under.”

Mid Atlantic’s marketing team, he pointed out, was urging loan officers to place loans with Lending Tree but that, because of high rates and fees, there was a “great” fallout rate.

Forum, in his e-mail, blamed his company’s closing on a drop in origination volume and the cost of dealing with legal actions taken by lenders attempting to recover their losses by filing suits against Mid Atlantic.

Those actions include an ongoing suit that First Franklin Financial Corp. filed against Mid Atlantic on Sept. 7, 2007, in U.S. District Court, District of New Jersey. In that case, Mid Atlantic is accused of submitting seven fraudulent loans files for more than $2.2 million that resulted in losses of more than $1.0 million.

Legal and accounting professionals are dealing with these issues, Forum, who did not respond to phone calls from MortgageDaily.com, said in the e-mail.

On its Web site, Mid Atlantic still says it “is licensed in numerous states and growing” and is “looking for branch managers.”

The Sewell, N.J.-based company, which noted it launched in December 2001, had more than 600 employees in 75 branch locations operating in 23 states, according to its Web site.

But many of its branches had been closing.

Five of the branches MortgageDaily.com attempted to call had numbers that were non-working or not in service.

“Most of the branches are already switched over [to other companies],” the New Jersey branch manager said. “We’re in the midst of it right now. We’re now placing loans to other locations. So there’s been no down time.”

Similarly, the Florida branch manager said he will have a closing at another broker shop on Thursday for one of some 15 loans he now has in his pipeline.

First Franklin Financial Corporation, Plaintiff, v. Mid Atlantic Capital, LLC, Defendant.
Case 1:07-cv-04398-JEI-AMD, Sept. 7, 2007 (U.S. District Court, District of New Jersey)

Related Posts

Federal Housing Administration$1,224.5 billionDec. 31

Third-Quarter 2012 Mortgage Litigation Index

Lawsuits involving excessive fees, servicing fees and loan fees beyond state maximums. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Fannie Mae and Freddie Mac Orangeburg County, Richland County, South...

Federal Housing Administration$1,224.5 billionDec. 31

Net Branch Lawsuits

Litigation involving net branch operations. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story PHH Mortgage Corp. Mathews Supreme Court of Virginia na Court held that the term "branch office" includes not only...

Federal Housing Administration$1,224.5 billionDec. 31

Whistleblower Lawsuits

Litigation related to loan servicing, including escrow issues, transfer of servicing and servicing borrowers in bankruptcy and foreclosure.   Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story Bank of...

Federal Housing Administration$1,224.5 billionDec. 31

Mortgage Servicing Lawsuits

Litigation related to loan servicing, including escrow issues, transfer of servicing and servicing borrowers in bankruptcy and foreclosure. Defendant Plaintiff Court Amount Overview Case Title Case Number Date Filed Date of Activity Link to Story BAC Home Loan...

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming paperwork has been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and furniture need to...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand-new mortgage loan can be a difficult task, especially for first-time homeowners.   After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first...

Newsletter

Don’t worry, we don’t spam