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| A mortgage broker accused of using predatory lending practices on every loan it originated in Washington faces a state order requiring it to make hundreds of thousands of dollars in restitution to borrowers. But the now-defunct company has appealed the order and claims the state may have overstepped its authoritative boundaries.
After a lengthy trial considered one of Washington’s “largest predatory lending cases,” a Thurston County Superior Court judge recently upheld the Washington State Department of Financial Institutions’ final order requiring Nationscapital Mortgage Corp. to pay more than $712,500 in restitution to 120 consumer in the state, the agency announced. The superior court’s decision follows the California-based lender request for judicial review of the final order issued January 2003. “Our investigation found predatory lending practices in virtually every loan originated by Nationscapital since the company’s inception in 1993,” Chuck Cross, the department’s director of consumer services said in the announcement. “However, specific amounts of harm could only be identified for 120 consumers.” The department said it has pursued allegations against Nationscapital since 1997. Among its findings, were that the broker “conducted business from unlicensed locations, used bait and switch tactics, violated trust account requirements, and failed to maintain books and records.” Many borrowers were led to believe they were purchasing a low rate, fixed mortgage at little or no cost, but ended up in a high rate, adjustable mortgage at a substantial cost, according to the state. Nationscapital’s owner Jamie Chisick and corporate managers Michael Buff, Kevin Krause and Darin Williams were found guilty as charged, including failing to provide required disclosures and misleading consumers about loans, the department reported. “I come away with a strong feeling that Mr. Chisick is like the Typhoid Mary of the brokerage industry and it’s his kind of behavior that is exactly why we have regulations in the state of Washington,” the judge reportedly said in his oral ruling. “It’s abominable.” The order banned Chisick from the industry in Washington for 20 years and fined him $292,800, while Buff, Kraus and Williams were each banned for five years, the announcement said. Additionally, the department said Nationscapital was ordered to pay over $457,500 and its license to operate as a brokerage in Washington was revoked. But, Nationscapital, which is no longer in business, “has not paid any fines or restitution and since we believe Nations[capital] will be vindicated on appeal, we believe that it is highly unlikely that it will pay any money,” said the company’s lead attorney Gary Roberts in an e-mailed statement. The final decision is still “a long way away,” Roberts said in an interview. While the judge did not make any changes to the agency’s order, he did not impose a judgment as there were some close questions on the agency’s power of authority and the appropriateness of the restitution. Roberts said a certain statute gives the agency power to compliance audit a mortgage broker as often as it wants during the first two years of the brokerage’s operations, but afterward only allows it to investigate upon a complaint. The agency’s investigations were spurred by two complaints that arose after the initial two years. He pointed out that those two complaints have been settled. The statute does not give the state ability to expand examinations beyond what is relevant to investigate specific complaints, Roberts said, adding that the agency investigated all the loan files, books, documents and other records produced in the history of the company. He added that he thought the legislation tried to strike a balance in how it could protect from the “government overstepping” its boundaries. But, the department does not agree with Roberts’ arguments, according to department spokesman Scott Kinney. “In our opinion, which was supported by the Administrative Law Judge and upheld by the Superior Court Judge, we clearly have the authority to investigate our licensees when we believe that they have committed violations of Washington’s laws,” Kinney said in an e-mailed statement. “Complaints are a trigger for the department to exercise this authority under the Act. In this case, we had complaints alleging violations that required further investigations. Brian Chisick, Jamie Chisick’s father, settled with the FTC in 2002 for alleged predatory lending through his subprime company, First Alliance Mortgage Company. The $60 million settlement was among the largest consumer protection recoveries in FTC history. Related: CA Company, Executives Banned from Brokering in Washington |
