Preferred Gets $1-Million Fine; Top Exec Banned

Controversial mortgage lender Preferred Credit Corp. agreed Thursday to pay a $1-million fine and its president agreed to a lifetime ban from the industry to settle a fraud lawsuit brought by state regulators.

The state Department of Corporations said that Irvine-based Preferred also agreed to the appointment of a loan monitor to ensure that borrowers have been repaid at least $1.4 million in excessive interest payments.

Preferred and its 29-year-old founder and chief executive, Todd A. Rodriguez, also agreed to tighten lending procedures to ensure compliance with state regulations.

Rodriguez said in prepared remarks that he was pleased the company and the state were able to reach an agreement. He said the refunds already have been made.

The company’s president, Walter F. Villaume, a real estate lawyer, agreed to leave the company and be banned for life from the mortgage lending industry. His lawyers declined comment about the settlement.

The Corporations Department sued last month to revoke Preferred’s license, saying borrowers were cheated out of $1.5 million, loan records were falsified and Villaume had lied about his major ownership position in the company.

In settling the case, none of the parties admitted any wrongdoing, a factor that could provide a windfall for Villaume.

Attorneys on both sides said the absence of a finding of guilt apparently makes Villaume eligible to receive a “golden handshake” severance pay of at least $1.26 million, according to his contract.

Preferred remains in business, though regulators say they could still move to shut it down later. Future action will depend on what is turned up by the loan monitor and by a separate independent investigator to be appointed later.