A California mortgage broker already facing a rash of lawsuits could now lose his license, while fraud has originators in other states facing regulatory actions. And Minnesota originators may face license losses if they fail to adhere to newly enacted laws.
The California Department of Real Estate has moved to take the license of Hendrix Montecastro and his Stonewood Consulting brokerage, according to documents filed by the agency.
A complaint filed by Janice Waddell, the state’s deputy real estate commissioner, accused Montecastro and his company of more than 20 violations of state mortgage law including failing to maintain proper records, using inflated appraisals to increases commissions, withholding information from customers and mishandling of escrow funds and accounts.
“This conduct and violation(s) are cause for the suspension or revocation of the real estate license and license rights” of Montecastro, Waddell wrote in the 17-page complaint.
Under state law, Montecastro is entitled to a hearing to answer the charges. He could not be reached to comment.
Montecastro and his firm are also named in at least four lawsuits filed by disgruntled investors. The investors say Montecastro and others ran a multi-state mortgage fraud scheme that involved several hundred investors and millions of dollars in shady real estate transactions. The investors claim they lost more than $600,000.
The suit also claims the defendants used some of the money that was supposed to be invested in homes for their own personal expenses.
In Nevada, Mortgage Lending Division Commissioner Scott Bice has revoked the license of USA Commercial Mortgage, which operates as USA Capital.
In an order, Bice cited 10 alleged violations of the state’s mortgage laws, including commingling, mishandling and misusing client funds; failure to accurately report on the status of loans; and making illegal interest payments to investors on defaulted loans.
Bice also found the company guilty of an additional seven separate “servicing irregularities which together constitute numerous instances of material misrepresentation … and further constitute deceitful, fraudulent or dishonest business practices,” according to a statement from Bice’s department.
The company could be fined up to $1,000 on each violation; it can also request a hearing to dispute or question the order, according to a statement from regulators.
USA Capital has filed for bankruptcy.
In a separate cease and desist order, Bice said he found Compass Financial Partners LLC, a company that purchased some of USA’s Capital’s Assets, was servicing loans and performing other functions without the proper licenses.
Minnesota regulators and lawmakers have taken steps to ensure loan originators are making good loans. A new law requires originators to verify the “suitability of a loan”, according to Lotstein Buckman, a Washington law firm that works in the mortgage industry.
Under the law, originators are required to determine “that the borrower is able to pay the principle, interest, real estate taxes, homeowner’s insurance, assessments and mortgage insurance premiums,” the law firm said in a statement.
The law also contains a component designed to curb predatory lending “by addressing a mortgage broker’s relationship to a borrower.”
Brokers have to provide “all material facts” to borrowers; cannot charge or accept undisclosed fees; must carry out all lawful instructions from a borrower; and account for all money in a transaction.
In Georgia, the state Department of Banking and Finance has issued a final cease and desist order to loan officer Mark Raphael Rice of Atlanta. The department said in a statement it issued the order against Rice “for making misrepresentations in loan files submitted to mortgage lenders and for processing loan documents signed in blank by borrowers.”
