Allstate Home Loans Is Accused of Fraud : Sherman Oaks: The mortgage loan brokerage’s owner says he will challenge the state’s allegations at an upcoming hearing.
The California Department of Real Estate is seeking to suspend or shut down Allstate Home Loans Inc., a mortgage loan brokerage in Sherman Oaks, after alleging that Allstate has defrauded private investors of at least $306,000.
In a complaint filed last month, the agency accused Allstate Home Loans and its owner, Jerry Wexler, of improper record-keeping, misrepresentation and fraudulently converting money that should have been returned to investors.
“It’s one of the more serious accusations we’ve filed,” said William Moran, the department’s managing deputy commissioner. “As far as the amount of money missing, it’s very serious.”
State officials are seeking to revoke or suspend the licenses of Wexler. Moran said the department was investigating more allegations from other investors who contend that they have been cheated of tens of thousands of dollars.
In an interview, Wexler said he would challenge the allegations at an upcoming hearing before an administrative law judge. He acknowledged that “there are certain things that have gone wrong” with his 10-employee company, which he said services about $15 million in loans.
He blamed the company’s troubles on the sluggish real estate market. “It’s the economy,” he said.
Allstate, which is not related to Allstate Insurance Co. owned by Sears, matches private investors seeking a high rate of return on their investments with borrowers who generally have difficulty getting home loans from banks, or who need cash quickly. Allstate issues either second or third mortgages.
Allstate then collects monthly interest payments from borrowers, deposits them into trust accounts and distributes them to investors, less a service fee. Allstate secures these loans with real estate held by borrowers. If a borrower defaults on a loan, Allstate can foreclose on the property, sell it and repay the investors.
But last fall, after officials concluded an 11-month audit of Allstate’s operations, the state found that in some cases Allstate failed to return money to an investor after foreclosing on a borrower’s property. The 18-page complaint cited four trust fund accounts that state officials allege were mishandled by Allstate.
Wexler declined to respond to any specific accusation in the complaint. He contended that Allstate has had few problems in the five years that it has been doing business in Sherman Oaks. Allstate, which Wexler said previously operated in Van Nuys, received a license from the Department of Real Estate in April, 1983.
Although Wexler founded Allstate Home Loans, state records show that Wexler became the designated officer of Allstate only in August, 1990, a month after he regained an unrestricted real estate broker’s license.
In May, 1982, Wexler’s broker’s license was revoked by the Department of Real Estate after officials accused him of defrauding an investor of $14,000. Wexler had been working with a restricted license since December, 1987.
Disciplinary action against real estate brokers is not uncommon. The Real Estate Department’s Los Angeles office took disciplinary action against 72 people in the three months that ended Feb. 28, and complaints are filed routinely. Nonetheless, state officials said the complaint against Allstate and Wexler was unusual.
According to the state, Wexler is also an officer of Allstate Funding Inc., a mortgage broker that operates in an office a block away from Allstate Home Loans. However, Barry Marks, president of Allstate Funding, a first mortgage issuer, said that Wexler resigned from Allstate Funding. But Marks said he did not know when Wexler tendered his resignation.
Isidore Rosenthal, a retired government worker in Reseda, contended that more money was being mishandled by Allstate Home Loans than is specifically cited in the state’s complaint.
Rosenthal, who has also filed complaints with state officials, said he invested $20,000 with Allstate Home Loans in December, 1989. That money became part of a $50,000 loan that Allstate made to Bernice Farnden of Mission Hills. The loan had an annual interest rate of 13.5%, and Farnden said she agreed to make monthly interest payments and then repay the principal at a later date.
Rosenthal said he received monthly mortgage payments without problems. But in June, Farnden confirmed that she had paid off the entire loan, refinancing it with another lender. Yet Rosenthal said he has yet to receive his original $20,000 investment, despite repeated calls to Allstate.
Wexler declined to comment about Rosenthal’s loan, but said he was looking into the matter.
