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Regulators shutter 75-plus loan offices

The Arizona Republic

The Arizona Republic

PHOENIX – A Mesa mortgage firm and more than 75 of its branch offices in metropolitan Phoenix were shut down by state financial regulators.

The Arizona Department of Financial Institutions cited illegal lending practices in pulling the license of Mesa-based Eagle First Mortgage and its broker, David Sanchez, last week. Regulators described more than 100 illegal money transactions, loan activities and hiring practices.

“Eagle First is surrendering its license as a result of multiple and repeat violations,” said Felecia Rotellini, superintendent of the Department of Financial Institutions, which regulates mortgage firms.

The department began its examination of Eagle First’s operations last summer. In the fall, it reported its findings to the Attorney General’s Office and the Office of Administrative Hearings. Eagle First agreed to shut its doors instead of go through the process of a hearing on the case.

The Department of Financial Institutions has the power to fine or close a mortgage firm. But only a prosecutor such as the attorney general can go after a mortgage broker for criminal activity. Regulators wouldn’t comment on whether criminal action would be taken against Eagle First.

The firm has until March 14 to finish outstanding loans and close its doors.

A wave of mortgage fraud started spreading across metropolitan Phoenix last year that could cost lenders millions of dollars and erode values and confidence in Arizona’s real estate market and economy.

Most of the fraud is coming from cash-back deals that involve obtaining a mortgage for more than a home is worth and pocketing the extra money. There are other types of fraud, such as faking and forging documents and lying about income and other personal information for loans.

The Department of Financial Institutions joined forces with other state and federal regulators and law enforcement agencies late last year to form a mortgage fraud task force to go after offenders.

Eagle First Mortgage had been cited for offenses before. In early 2004, it was fined for 10 violations. Some of its recent violations include laws it had broken three years ago, according to the Department of Financial Institution’s consent order.

Sanchez didn’t return phone calls to his Mesa office.

Several employees also were named in the complaint. Those employees aren’t licensed and could get jobs at other mortgage firms. So could Sanchez, as long as he doesn’t apply to be a broker again. Brokers must be licensed.

It’s estimated there are as many as 18,000 unlicensed people taking mortgage applications, negotiating rates and getting loan commissions statewide.

Legislation recently was introduced in Arizona to license all loan officers and originators to help crack down on bad loans and mortgage fraud.

Chris Mozilo, president of the Arizona Mortgage Lenders Association, said the Department of Financial Institutions is doing a good job with limited resources “cleaning out the bad actors” in the mortgage business.

“It’s very positive for the industry and consumers,” he said.

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