Pioneer Mortgage Is ‘a Mess,’ Investors Told

There was little good news for the nearly 1,000 disgruntled Pioneer Mortgage investors who braved Wednesday’s hail and rainstorms to hear the first official explanations of the jumbled string of events that forced Pioneer to seek protection in U.S. Bankruptcy Court in January.

J. Cole Francis, the court-appointed examiner who has spent five weeks studying the financial unraveling of La Mesa-based Pioneer, told investors that only 10% of the loans arranged by the mortgage brokerage firm were still generating interest. The remainder have been classified as “problem loans” because borrowers have stopped making scheduled payments.

In a report released last week, Francis hinted that Pioneer, a $250-million mortgage brokerage operation, used a “Ponzi scheme” in late 1990 to solicit new funds to pay off previous investors prior to the bankruptcy filing.

The investors, who met at Golden Hall in downtown San Diego, were mostly silent during the four-hour meeting at which Francis and the company’s current management explained steps being taken to safeguard their investments.

Francis told investors that Dennis Schmucker, who became Pioneer’s president Jan. 10, “inherited a terrible mess.” Before last year, Pioneer had compiled a nearly spotless record during 45 years in business. Pioneer apparently fell victim to rapid growth, poor management decisions and “possible” fraud, Francis said.