The real estate blog.

It has been said about investors that those swimming naked are only revealed when the tide goes out. In essence, it’s hard to get caught with your pants down when you’re up to your neck in water.

During the mortgage boom, lenders were so focused on expanding business, they didn’t care too much about protecting the quality of their loans. Now that things have slowed down, they are paying much closer attention to specific deals.

The latest group to get caught up are the loan officers and mortgage brokers of Champion Mortgage. In an investigation by the Utah Department of Real Estate, these brokers were found to have falsified loan documents, forged signatures and even “modified” tax records to close more deals. According to KSL.com -

Derek Miller, director of

the Utah Division of Real Estate, said, “Looking into his business led us to a second mortgage officer, to a third, to a fourth, until we realized that pretty much all loan officers in that company were involved.”

That business, Champion Mortgage, was operated out of a house that now sits empty and up for sale.

This is “classic” mortgage fraud, the kind that consistently lands Utah on top of the nation’s mortgage fraud lists. It’s also the kind of fraud Utah’s recently enacted mortgage licensing laws were designed to prevent. Despite being in existence for about four years now, Utah is still a top ten State for mortgage fraud and all borrowers pay a premium for this distinction.

One employee of Champion Mortgage, spoke anonymously and said -

the state is looking to blame mortgage brokers for bad loans. He says the state is running them out of business and ruining their livelihoods. They also say they were strong-armed into signing documents saying they falsified information.

The evidence presented suggests otherwise -

Those orders say Phillip Rowson and Leo Kanell, among other things, submitted fake letterheads and forged signatures. Eric Larsen is accused of inflated income information.

In addition, Miller says, “Mr. Eric Larsen gave the phone number of his assistant as the contact number when the bank would call to verify employment of the applicant.”

But it doesn’t stop there. Shawn Roach is also accused of altering credit and insurance documents. The state contends Carlos Lira inflated income statements, though Lira didn’t admit to any wrongdoing. Each had his mortgage license revoked, each faces fines.

I for one am thankful the DRE is doing their job. Shady mortgage brokers present unrealistic options for borrowers and give everyone in the industry a bad name. This purposeful deceit is criminal and should be prosecuted as such. For now, these former employees of Champion Mortgage simply have to find a new line of work and pay some fines which could be pretty steep. Criminal charges have not been filed. These brokers also have the possibility of a civil lawsuit should any of the loans they originated default.

The one way to never be caught with your pants down is to keep them on. We had a terrific boom over the past few years. Is it really worth it to be dishonest to get a few extra dollars? I don’t think so and I sleep very well at night because of it.