Mortgage Daily Logo
mortgage news from industry experts

Lender Sues Former Executives

Lender Sues Former ExecutivesCMSC v. Interim Funding, et al

February 5, 2009

By MortgageDaily.com staff

A Wisconsin-based mortgage company has sued its former management team. The defendants are accused of secretly operating their own mortgage business and warehouse lending facility while they were still responsible for running the plaintiff firm. Resulting losses are alleged at more than $15 million.CMSC Inc. filed the lawsuit Monday in the civil division of Milwaukee County’s Circuit Court. Named as defendants are Interim Funding LLC, former CMSC chief executive officer Richard E. Jungen, former CMSC president Elaine E. Jungen and Jerome J. Poehnelt, court records indicate. Also named are Kevin J. Dwyer and Charles L. Miller.

Wauwatosa-based CSMC, which also does business as Central States Mortgage Co., incorporated in March 1992 and was originally owned by the two Jungens, Dwyer and Poehnelt, according to a copy of the complaint provided by the plaintiff’s attorney Douglas H. Frazer. The company operated as a mortgage banker and utilized warehouse lines-of-credit to finance loans held-for-sale for up to two months.

CSMC never invested in loans held-for-investment, the lawsuit says. Some of its business was derived from credit unions.

The company reorganized in 1997 and 13 state-chartered credit unions acquired 53 percent of the CSMC’s shares. With the reorganization came a new name: CUSO — an acronym for “credit union service organization.” Since then, the number of credit union shareholders has risen to 30 and their collective share of ownership is around 72 percent.

The credit unions also invested in pools of mortgages originated by CSMC.

As chief executive officer until July 2008, Richard Jungen and the other defendants who were each officers of CSMC secretly invested in some of the pools themselves, the lawsuit says. A conflict-of-interest existed because as investors, the defendants had the ability to call the financing immediately due and payable.

In July 1997, the defendants launched Interim Funding — which is also based in Wauwatosa. Interim began buying mortgages originated by CSMC — but without a written agreement. CSMC directors only learned of the defendants’ interest in Interim and the pool financing in June 2008 as a result of board inquiries. When loans were rejected for purchase by Interim, CSMC was stuck with the mortgage which often defaulted or wound up in foreclosure.

The defendants allegedly shifted losses from Interim to CSMC.

“After the 1997 change in ownership, and continuing until at least August 2008, Interim, Jungen, Elaine Jungen, Poehnelt, Dwyer and Miller created, and participated in, a fraudulent scheme to enrich themselves at the expense of CSMC,” the plaintiff claims. “Through their operational control of CSMC, the ownership and control of the operations of Interim, the control of the P55 pool, and the concealment of their activities from the credit union investor directors of CSMC, these defendants manipulated the business of CSMC to its detriment.”

Under Jungen’s leadership, CSMC improperly purchased foreclosed mortgages and REOs — benefiting Interim and costing CSMC more than $15 million, the complaint says.

Sometimes, CSMC would allegedly refinance delinquent loans owned by Interim even though the loans had been previously purchased from CSMC.

Interim continued to demand that CSMC repurchase delinquent loans — ultimately forcing CSMC to repurchase all of the defaulted loans from the secret investment pool.

The defendants are also accused of deceitfully refinancing loans that had been on warehouses line too long and funding them through other warehouse lines as purchase transactions.

As delinquent and nonperforming loans began increasing in 2007, the defendants allegedly waited until 2008 to inform directors — leaving too little time to mitigate losses.

After CSMC directors ordered the termination of the relationship between Interim and CSMC, the defendants are accused of continuing risky lending and liquidating the pool of loans.


CSMC Inc., 10425 West North Avenue, Wauwatosa, WI 53226, Plaintiff, vs. Interim Funding LLC, Registered Agent Richard E. Jungen, 10425 West North Avenue, Suite 149, Milwaukee, Wisconsin, and Richard E. Jungen, 601 East Erie Street #605, Milwaukee, Wisconsin 53202, and Elaine E. Jungen, 2349 North 86th Street, Wauwatosa, Wisconsin 53226, and Jerome J. Poehnelt, W345 S8720 Whitetail Drive, Eagle, Wisconsin 53119, and Kevin J. Dwyer, 140 Legend Court, Wales, Wisconsin 53183, and Charles L. Miller, defendants
.
Case Number 2009CV001723, Feb. 2, 2009 (Milwaukee County Circuit Court Civil Division)

next story

back to current headlines
 

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 home closing documents have 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...

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 mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION