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Mortgage Banker Abuses Warehouse Line

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Instead of funding his loan originations, a Louisiana mortgage banker had other plans for his warehouse line-of-credit.

Sabine State Bank provided a warehouse line to First Fidelity Mortgage Inc. The line was secured by customer notes pledged by First Fidelity.

But William E. Nichols, the owner and president of First Fidelity, began providing the bank with notes that he fraudulently prepared himself, according to U.S. Attorney Donald W. Washington. Nichols allegedly forged borrowers’ signatures — enabling the fraudulent loans to be funded.

“When the bank would deposit funds into the account to fund these loans, Nichols just kept the money for himself,” the government said.

In all, Nichols — who has pled guilty — fraudulently collected $2.9 million, the statement said.

Nichols, who faced up to 30 years in prison and a $1 million fine, is scheduled to be sentenced on Feb. 4, 2010.

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