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States Revoke Licenses, Issue Fines

States Revoke Licenses, Issue Fines

Recent mortgage lending licenses actions

August 21, 2007


photo of Patrick Crowley
Regulators in New Jersey, Georgia and Connecticut have been busy blocking mortgage businesses from abusing borrowers and loan applicants.

New Jersey Banking and Insurance Commissioner Steven Goldman has warned potential borrowers to make sure mortgage brokers are licensed with the state and loan originations are registered in New Jersey. In addition, he suggested prospects demand an explanation of the fees being charged.

Doing so could help prevent problems like those being experienced by customers of Apex Financial Group, a company Goldman has told to stop doing business in New Jersey.

The commissioner has moved to revoke the license of Apex while ordering the company, which is based in Brandon, Fla., to pay a $700,000 fine and refund fees to customers.

In a statement announcing the order, Goldman listed Apex’s 12 violations of New Jersey law, including using unregistered mortgage solicitors, charging improper fees of up to $1,200, improperly storing and handling records, operating unlicensed branch and failing to keep the state current on its activities.

New Jersey’s Goldman said in a statement he has ordered bankrupt American Home Mortgage, formerly an Alt-A lending giant, to “immediately stop taking mortgage applications … and stop closing home loans without available funding.”

The company violated the state’s mortgage laws by ceasing to distribute money for loans that had been approved or were closing, closing offices without informing the state and taking applications knowing the loans could not be funded.

But the company is just operating with a fraction of its former 7,000-employee workforce as a servicing operation and the state’s move is likely to have little if any impact.

Goldman is advising consumers who have submitted loan applications to American Home to contact their broker and find a new lender.

Connecticut has taken similar action, though there failure to comply could cost American Home up to $1 million in fines, according to a statement from state banking Commissioner Howard F. Pitkin.

American Home failed to transfer funds for 38 loans scheduled to close, Pitkin said. The company also failed to fund loans on time, live to agreements it made with borrowers and cooperate with investigators.

“My primary responsibility is the protection of Connecticut consumers, Pitkin said. “Therefore, in addition to issuing this order which requires the company to cease all business activities, I have also ordered American to create a separate escrow account containing all fees that consumers paid to the company, in order to reimburse those consumers whose mortgage loans did not close.”

Connecticut has moved aggressively in the past on companies that did not fund loans.

Earlier this year, Connecticut was among eight states that issued cease and desist orders against Mortgage Lenders Network after the company failed to fund loans — even though it stopped taking new business in January.

North Carolina broker Hall Financial Services has lost its license and has agreed to reimburse customers under to $250,000, according to a statement from state Banking Commissioner Joseph Smith.

James A. Hall, who operated the company, originated loans without considering the borrowers’ ability to repay. He also made “multiple misstatements” in loan documents.

The state said in the last three years more than 40 percent of the loans Hall originated went into foreclosure.

Earlier this year, Commissioner Smith and North Carolina Attorney General Roy Cooper announced that builders who held the second mortgages brokered by Hall agreed to forgive nearly $2 million of the loans.

Hall has a year to pay $150,000 in reimbursements to his customers. If he fails to do so, the amount rises to a quarter of a million dollars.

“Mortgage brokers must do right by their customers,” Deputy Commissioner of Banks Mark Pearce said in a statement, “or they will not be mortgage brokers in this state.”

Georgia regulators have revoked the licenses of three mortgage brokers — Hunter Mortgage Co., and its president, Richard Hunter; First Class Mortgage and President Susan Ward; and Home Loan Master and President Chang Ho Im.

All three brokerages and brokers agreed to surrender their licenses under consent decrees filed with the state.

According to the Georgia Department of Banking and Finance, Home Loan Master misrepresented or concealed information in mortgage transactions and used misinformation to induce customers to take loans. The company also failed to maintain proper records, paid employees — including Im –without filing W-2 tax forms, allowed employees to work for more that one licensed broker and overall did not comply with state mortgage laws.

Susan Ward and First Class Mortgage were cited for the same violations as Im and Home Loan Master.

Richard Hunter lost his license for employing a felon as well as a manager not approved by the state; doing deals with unlicensed brokers and others in the industry; withholding information and making false statements during state examinations of his operation; and not properly conducting business under Georgia’s mortgage laws.

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