Sherman Oaks Mortgage Firm Under Scrutiny
State regulators are investigating Property Mortgage Co., a major mortgage broker in California, after receiving reports from the public that Property Mortgage has stopped brokering new loans and suspended payments to investors who provided the cash for many of those loans.
Randy Brendia, regional manager in Los Angeles for the state Department of Real Estate, confirmed Monday that his agency is auditing Property Mortgage to determine the problem after receiving the calls.
“We are currently looking at their books and records,” Brendia said. He said it was too early to tell what the audit might reveal.
Officials of Property Mortgage, which is in Sherman Oaks, did not return repeated telephone calls requesting comment. State records show the company was incorporated nearly 20 years ago and that its principals are Elliot R. Fine and Stanley Glickman.
The company arranges mortgage loans to borrowers using cash that comes primarily from investors and is a major mortgage broker in the state, according to people familiar with Property Mortgage’s operations and to pending lawsuits in Los Angeles Superior Court involving Property Mortgage.
Some of the investors put their money in a Property Mortgage affiliate named SLGH Investors Inc., and Property Mortgage acts as the broker of the loans, according to court records.
Barry S. Glaser, a Los Angeles lawyer who helps Property Mortgage collect from borrowers who are in bankruptcy proceedings, said he had no information about the company’s apparent problems. He said, “I am doing everything in my power to have these bankruptcy matters resolved so that money can come into Property Mortgage. I expect that in 60 to 90 days, a substantial amount of money will come in. We believe the company will survive.”
Gary Judis, president of Aames Home Loan in Los Angeles and chairman of the California Independent Mortgage Brokers Assn., said whereas Aames and certain other mortgage brokers concentrate on residential housing mortgages, Property Mortgage focuses much of its effort on arranging loans for commercial properties.
Because of the economic recession and the real estate slump in California, one possibility might be that too many of Property Mortgage’s borrowers defaulted on their loans, leaving the company unable to pay its investors.
If Property Mortgage got into a cash crunch, it would not be alone.
Pioneer Mortgage, a La Mesa, Calif.-based mortgage broker that operates similarly to Property Mortgage, filed for reorganization under Chapter 11 of the federal bankruptcy laws on Jan. 9 because too many borrowers had defaulted on loans Pioneer arranged, leaving Pioneer unable to relay payments to its 2,000 investors.
Pioneer, with about $250 million in investors’ money tied up in loans when it filed for Chapter 11, was well established, had a record of making regular payments to investors and focused on commercial properties, traits reportedly shared by Property Mortgage.
According to court records, the loans Property Mortgage makes are sometimes secured by second trust deeds, that is, second mortgages on properties.
