Customer Complaints, Financial Mismanagement Lead to License Suspension

The Maine Office of Consumer Credit Regulation (OCCR) reported that it recently issued an order to revoke the license of Lighthouse Mortgage LLC. The order said the company failed to comply with the Consumer Credit Code and sound business practices, and as a consequence was unfit to conduct business as a loan broker.

“In dealings with clients, Lighthouse’s failure to abide by the general standards of professional conduct resulted in a fundamental unfairness to its customers,” the OCCR director said in a statement.

The OCCR reported that within a short period during 2003, it received complaints from five different consumers. Allegations ranged from undue mortgage application delays and surprise closing costs, to lost locked-in rates and claims of consumers’ names being signed on documents without their knowledge or permission.

The complaints and Lighthouse’s failure to promptly respond to investigators about such acts — despite a previously written disciplinary agreement with the state that the company would be responsive to regulators’ concerns — led to a three-day hearing in March, the OCCR said.

Lighthouse operates in Cape Elizabeth, Maine, and its only members are Paul Lavallee and his spouse, the regulating division said. The order said the couple testified the mortgage business is the sole source of income for their family.

Regarding the complaint that Lavallee forged the signatures of a couple on a borrower’s request for a payoff statement, Lavallee testified that he “thought he had permission” to sign for the consumers, but then admitted that he “didn’t use good judgment,” according to the director.

In an effort to prove that the clients had not been harmed, “Lavallee testified under oath at hearing that he had obtained a very favorable mortgage rate” for them from a bank, but evidence produced by OCCR at the hearing indicated the bank had denied the couple’s application for a mortgage, added the director.

Lavallee told MortgageDaily.com that because of health problems, he was not able to meet personally with the couple and had received permission from one of the couple’s members to forge a signature. Lavallee said the loan was approved and he had evidence of it. However, he did not take this evidence to the hearing and although he made the state aware he had it, the state would not accept it as original evidence.

When referring to some of the other complaints, Lavallee pointed out that he had compared the loan rates he gave his clients to what other brokers had offered them, and his calculations showed that in one deal he had saved his clients over $34,000 and in another deal he had saved a client over $26,000.

There was also evidence that showed Lighthouse’s business checking account and its consumer escrow account were both routinely overdrawn, OCCR said. Additionally, there was evidence the brokerage failed to pay for a state audit of its activities, failed to pay an appraiser’s bill even after the appraiser obtained a court judgment, and used its consumer escrow account for personal expenses on one or more occasions, the report said.

Lavallee admitted he did use checks from an escrow account, but said the funds included money earned from the fees on appraisals, inspection and other fees associated with the Good Faith Estimate.

Under the order, the Lavallees are not allowed to apply for a license for at least two years. However, they can seek employment with another licensed loan broker, under the conditions that their new employer presents a plan to supervise them and take responsibility for their activities.

Under Maine law, Lighthouse has 30 days following the receipt of the order — issued May 12 — to appeal the decisions set forth in it.

Lavallee said he will appeal the order.

“I was given a chance to speak, never given a chance to explain,” he said. While the consumers were given the chance to express their viewpoints, he said he was not given the chance as he could only express himself through the questions he was asked, and did not have the opportunity to explain the savings and other benefits his clients did receive.

The order said that Lavallee blames much of the company’s problems on his recent spate of health issues — he testified as to “heart attacks, a bout with cancer now 3 years in remission, congestive heart failure [and] arrhythmia.”

While the factors could be applied to the remedy ordered, the state said he did not find that the health issues excused or explained the repeated violations of the Consumer Credit Code.

“If illness interferes with a loan broker’s ability to maintain proper financial records, avoid deficits in business and escrow accounts, be responsive to consumers’ reasonable needs and be responsive to regulators’ inquiries regarding consumer complaints, then it is the responsibility of the loan broker to recognize and address those deficiencies, or else to seek additional help or curtail its activities so as to avoid harming its customers,” the director added.