Fort Wayne News Sentinel – March 10, 2005

Mike Dooley  writes in the Fort Wayne News Sentinel that one of the nation’s largest wholesale mortgage lenders says in a federal lawsuit that a Fort Wayne-based mortgage broker, a title company and an appraiser allegedly used fictitious claims and inflated appraisals that have defrauded the lender of millions of dollars.

Read the Civil Complaint by clicking here

But a spokesman for a defendant in the lawsuit, Maximum Mortgage Inc. on St. Joe Road, said neither he nor the others, including Accelerated Title Co. on Rupp Drive and appraiser Greg Chevalier who worked with Appraisal Source of Fort Wayne and Allen County Appraisals Inc., did anything wrong, and insisted it was the lender’s poor business decisions that were responsible for the loss.

The lawsuit was filed late last year in U.S. District Court in Fort Wayne by ABN Amro Mortgage Group, a wholly owned subsidiary of Standard Federal Bank. It named 15 defendants, including Maximum, Accelerated, Appraisal Source and Allen County Appraisals, and said while ABN loaned more than $5.5 million on 149 rental properties two investors bought from one of the defendants, the properties had an aggregate value of only $3.1 million.

The lawsuit said ABN is the fourth- or fifth-largest wholesale mortgage lender in the country, buying loans from 4,000 to 5,000 mortgage brokers in all 50 states. The brokers are agents of the mortgage borrowers and assist borrowers in finding a loan by gathering information such as employment, bank accounts and credit reports for presentation to firms such as ABN.

Documents that accompany the lawsuit showed what ABN said were the original principal amounts of the loans along with the true market value of the properties. In several cases the amount of the loan was at least twice the fair-market value of the real estate and, in one case, it was eight times more than the fair-market value. The properties are scattered throughout older areas of the city, with most in the Bloomingdale neighborhood and central and east sections of Fort Wayne.

According to the lawsuit:

♦ The properties were originally owned by Rex Wells, with Wells agreeing to sell 79 of them to James R. Null after he was introduced to Null by Justin Stuckey of Maximum Mortgage. Wells later agreed to sell the remaining 70 to Leif Brogren after being introduced to Brogren by a local real estate agent, the suit said.

♦ Maximum Mortgage completed most of the loan applications submitted to ABN on behalf of Null and Brogren. ABN said Maximum Mortgage indicated the purpose of each loan was to refinance the real estate, when in fact the money was to be used for the original purchase of the properties.

♦ Another defendant, Accelerated Title Co., prepared the title work on 139 of the transactions, but insisted it failed to do the job “in a commercially reasonable manner in accordance with community standards.” The title company knew, or should have known, that in some cases titles to the properties were obtained after the day of, or the day before, the loan’s closing. Some title commitments included exceptions for mortgages that had not been recorded and were not to be recorded until after closing.

The suit accuses some or all of the defendants with breach of contract, fraudulent misrepresentation of claims, constructive fraud, negligence, breach of fiduciary duty, unjust enrichment, tortuous interference with contractual and business relations, civil conspiracy, deception, and racketeer-influenced and corrupt-organization activity.

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