Olympia - The Department of Financial Institutions entered charges this week against Century Mortgage, Inc. of Spokane, for allegedly overvaluing properties and falsifying papers to defraud borrowers and lenders. Also named in the charges were three co-owners and six loan officers. The charges allege numerous violations of the state's Mortgage Broker Practices Act.
An investigation by the state agency revealed a pattern of defrauding mortgage lenders and mortgage borrowers by using falsely inflated property values, “phantom” second mortgages, and false down payments. The three co-owners named in the charges are Ronald Burger, Dale “Sage” Gibbons, Dwaine Klein and a former owner, Gene Taylor.
Century Mortgage Company had its offices at 3401 Division in Spokane, and has been licensed to do business as a mortgage broker since October 30, 1997. Century makes residential mortgage loans or helps borrowers to obtain loans.
Century's affiliate, B&G Properties, which is owned by two of the three owners of Century Mortgage, was the seller in half of the 22 mortgage loans that are detailed in the statement of charges. Seven of the loans originated by B&G went into foreclosure within two years of purchase by unsuspecting borrowers. According to the state agency's charges, the reason for the high rate of foreclosure was a scheme to inflate property values and make loans targeting borrowers with poor credit, bankruptcies and outstanding judgments against them.
DFI contends that Century's representatives submitted false personal checks and business checks to support homebuyers' loan applications -- without the knowledge of the borrowers -- to convince lenders to make the loans. "With these fictitious 'phantom' payments or gifts, borrowers with marginal credit could qualify for much larger loans," says Mark Thomson, Director of DFI’s Division of Consumer Services.
Century and its representatives earned illegal fees off the top of each inflated mortgage, according to DFI's investigators, and borrowers ended up purchasing properties for far more than the original selling prices or actual current values.
"Century was a go-between for would-be borrowers and the mortgage lenders who do business throughout the country," explains Thomson. Among the lenders doing business with Century were First Franklin Financial Corporation and Investors Mortgage Company Limited Partnership, both with offices in Bellevue.
"In the process of funding mortgage loans," Thomson says, "mortgage lenders rely on borrowers and the companies representing them to be honest and comply with the law. We're all damaged when information is falsified, and lenders and borrowers are misled."
The company and individuals named in the charges stand to have their licenses revoked and face being banned for up to 20 years from doing any further business in Washington in the mortgage industry. In addition, Century Mortgage and the individuals named in the charges face a combined total of $1,854,450 in fines and may be ordered to pay back $442,268.30 in restitution to individual borrowers, a real estate appraiser and the mortgage lenders they defrauded.
Consumers with questions concerning Century Mortgage Company or B&G Properties should contact the Department of Financial Institutions at 1-877-RING DFI (1-877-746-4334).