Mortgage Company Accused of Loan Fraud : Courts: A quasi-federal agency has filed suit alleging Mission Viejo firm sold it $8.5 million in forged notes.
A small Orange County mortgage banking firm, whose owner served a prison term for a 1989 loan fraud conviction, is being accused in a civil suit of defrauding a quasi-federal agency.
The Federal Home Loan Mortgage Corp. alleges that PFG Mortgage in Mission Viejo defrauded it of $8.5 million in the sale of mortgage notes.
The company was renamed Silverado Bancorp earlier this month by owner Robert O. Potter in a move that some in the industry see as a poor judgment call or an odd sense of humor.
The new name evokes the Silverado Banking, Savings & Loan scandal in which a large Colorado thrift collapsed in 1988 at an estimated cost to taxpayers of more than $1 billion.
Potter reportedly is vacationing this week and could not be reached for comment. An employee at the company’s office said no one else could comment on matters involving the firm.
PFG and Potter are among the 41 individuals and companies identified last month by the Federal Home Loan Mortgage Corp. as firms it would not do business with because “their past conduct demonstrates a lack of business competence or integrity.”
The Federal Home Loan Mortgage Corp., better known as Freddie Mac, purchases large blocks of mortgage loans from residential lenders such as banks, S&Ls; and mortgage bankers.
In a suit filed recently in U.S. District Court in Los Angeles, Freddie Mac alleges that Potter and PFG sold the agency $8.5 million in forged mortgage notes. The real notes, the suit says, had already been sold by Potter to another investor.
In 1989, Potter and his then-partner, Steven Hughes, a Laguna Hills resident, pleaded guilty in Ventura County Superior Court to criminal charges of grand theft and conspiracy to commit grand theft in connection with a $2.5-million fraud case.
At the time, the pair operated Pacific Financial Group, which was then one of Orange County’s largest mortgage brokerages. They specialized in making high-risk loans that other Orange County brokers would not handle, industry sources said.
Complaints that Pacific Financial supplied fraudulent loan documentation led to state charges that Potter and Hughes manufactured loan applications with fake buyers and pocketed the loan proceeds. Each pleaded guilty to grand theft.
To avoid a five-year prison term, they agreed to repay the stolen money and each serve six months in prison. Hughes, however, fled and was later caught. He is serving the full five-year term at the California Institution for Men in Chino.
Sometime after his release, Potter shortened Pacific Financial Group’s name to PFG Mortgage. His recent decision to change the name again apparently followed the July 22 release of Freddie Mac’s list of individuals and companies with which it will not do business.
Potter at the time was quoted by National Mortgage News, the industry’s weekly trade journal, as being outraged that he and his firm were among the businesses on the list. He said he intended to sue Freddie Mac for effectively blacklisting him.
The list was distributed to the banks, S&Ls; and mortgage brokers from which Freddie Mac buys mortgages.
Several area mortgage brokers expressed amazement that Potter selected Silverado Bancorp as his new business name.
The collapse of Denver’s Silverado Banking, Savings & Loan was a major national story when it occurred and became an even bigger scandal in 1989 when it was disclosed that Neil Bush, one of President Bush’s sons, had been a Silverado director.
Neil Bush subsequently was investigated but not charged with criminal wrongdoing for his role in helping secure loans for business associates, including Bill Walters, a once-prominent Newport Beach businessman. Walters defaulted on more than $100 million in loans from Silverado.
