Surprising that KBCFP was not concerned with the reports of widespread Mortgage FRAUD that Vertical engaged in widely in the state of Mass. Guess FRAUD pays? See below News Story…….

State tells mortgage broker to halt

Officials: Firm forged signatures, faked files

By Kimberly Blanton, Globe Staff | April 4, 2007

New York mortgage broker Vertical Lend Inc. forged borrowers’ signatures, created false loan records, and charged fees that were never disclosed to customers, state regulators said yesterday as they ordered the company to stop selling mortgages in Massachusetts.

Among the findings in a January audit of Vertical Lend by the Massachusetts Division of Banks was that one out of four borrowers sampled had paid, on average, nearly $2,000 — and some as much as $6,445 — in fees they were unaware of.

Also yesterday, Massachusetts ordered SouthStar Funding LLC to halt operations after regulators learned the company is no longer funding some loans it had agreed to make, said David Cotney, the banking division’s chief operating officer.

That was the latest detail to emerge from the troubles roiling the subprime mortgage lending industry. Earlier this week the nation’s second-largest subprime lender, New Century Financial, filed for US Bankruptcy Court protection after it was unable to obtain new sources of capital to stay in business.

Vertical Lend’s chief executive, David Peskin, disputed some of the allegations by Massachusetts regulators and he blamed other irregularities on a single Vertical employee in the state who was a “bad apple.” The national lender has more than 200 employees and has been in business 20 years. He said this is the first such action against the company.

Regulators “should be looking at the overall highlights of the company and not a few bad operators,” Peskin said.

But Massachusetts regulators said some Vertical Lend customers told them they never signed loan documents that had their signatures on them; in some cases, signatures on the documents were spelled incorrectly. Those customers did receive the loan proceeds.

Cotney also said Vertical Lend had a “network of at least 50 unlicensed brokers they had retained” to sell mortgages. Under state law, brokers are exempt from licensing only if they are employed by one firm that carries a license to operate at specific locations.

“These were CPAs, tax preparers, and insurance brokers” who owned small businesses and “were doing this on the side” at locations that were not approved by regulators, Cotney said.

The banking division is also seeking to revoke Vertical’s license to operate in the state.

Vertical’s Peskin said federal loan disclosures were signed, though some state disclosures were not. The brokers, he said, were “part-time employees on the payroll.”

Meantime, SouthStar Funding, based in Atlanta, did not return several calls seeking comment yesterday. The state said the company provided about 1,760 mortgages in Massachusetts between 2003 and 2006.

Subprime lenders are coming under increasing scrutiny as the number of foreclosures against cash-strapped homeowners rises to near-record levels. Critics of the industry have contended the lax lending standards of some subprime companies are partly to blame, as they allowed some borrowers to buy homes they ultimately could not afford.

“The chickens are coming home to roost,” said James Campen, a former economics professor at the University of Massachusetts at Boston, who identified the subprime problem early on.

As many of these loans have become delinquent, Wall Street investors are demanding lenders reimburse them for the bad loans, sending many subprime lenders into a financial tailspin, he said.

Community activist Bruce Marks, chief executive of Neighborhood Assistance Corporation of America, which is refinancing some subprime borrowers’ mortgages, said the regulatory action is “better late than never .”

“But,” he added, “they need to make those companies make the homeowners whole.”

Kimberly Blanton can be reached at blanton@globe.com