Washington State Seeks Fine From Nationscapital
Regulators in Washington state are seeking a fine of nearly $2.1 million from an Orange County home loan business they have accused of cheating scores of customers in that state.
The complaint against Nationscapital Mortgage Corp., an Orange-based broker of home loans, also seeks to ban the firm and its owners--brothers Jamie and Brad Chisick--from mortgage lending activities in the state for 20 years.
Company President Jamie Chisick declined to comment, but in a recent letter to regulators in other states where the firm operates, Nationscapital predicted it “will be cleared of all charges.”
The case adds to a recent spate of bad news for the Chisick family and its home loan mini-empire.
Earlier this year, Coast Security Mortgage Corp., a loan broker also based in Orange, agreed to a $150,000 settlement with Oregon over allegations of deceptive business practices. A third Chisick brother, Mark D. Chisick, is Coast’s president.
And First Alliance Mortgage Corp. of Irvine, a lender whose founder and chief executive, Brian Chisick, is the father of the three brothers, is fighting a move by the powerful American Assn. of Retired Persons to join a string of lawsuits in Northern California on the side of irate borrowers.
Washington’s case against Nationscapital was outlined in a 170- page “statement of charges” that was issued in May, but has drawn little attention in California. In its complaint, the Washington Department of Financial Institutions is asking an administrative law judge to order payment of $664,801 in restitution to 136 Washington consumers, who allegedly were cheated out of about $300 to $13,000 each.
The complaint also seeks more than $1.4 million in fines and investigative costs from the company, Jamie and Brad Chisick, and two members of their staff.
Nationscapital uses telemarketers in California to solicit borrowers in Washington and other states, and the complaint quotes extensively from an elaborately scripted manual that, the state contends, coached phone solicitors to perpetrate an “integrated and highly effective scheme of deceiving and confusing consumers by, among other things, avoiding answering easy and relevant questions.”
According to the complaint, Nationscapital:
* Used bait-and-switch tactics to sign up borrowers, and misled them about basic matters such as interest charges, whether their loan had a fixed or adjustable rate, and how much they would be charged in processing and origination fees.
* Failed to fully disclose loan terms as required by state law, including failing to tell borrowers that the escrow firm used by Nationscapital was controlled by Jamie Chisick and charged more for its services than its rivals.
* Fiercely resisted demands to produce documents, and engaged in “file-stripping”--or ripping documents from their binders so investigators could not review them.
“In many instances, the investigators could shake the files and collect a large quantity of paper bits that fell free,” the report said. “A container of such document pieces has been maintained as evidence of file-stripping.”
In May, Nationscapital surrendered its Washington license in hopes of heading off an order revoking it. With a voluntary surrender, the firm might be able to reapply for a license, and could avoid fallout in other states, which might consider a license revocation in Washington as grounds for disciplinary action.
However, Washington officials are still pushing for the fines and revocation. A date for the hearing before an administrative law judge has not been set.
In California, Nationscapital and its officials are licensed by the Department of Real Estate and the Department of Corporations. Dan Garrett, a spokesman for the real estate agency, said it will monitor the Washington case and, depending on the outcome, could take disciplinary action on the firm’s California license.
Meanwhile, Washington authorities recently opened an investigation of Coast Security Mortgage, according to Chuck Cross, a supervising analyst with the Department of Financial Institutions.
Cross said investigators are reviewing consumer complaints of “being told one set of costs and ending up at closing with a different set of costs--higher, of course.” The complaints in many cases “are mirror images” of those lodged against Nationscapital, he said.
In Oregon, Coast in February settled a complaint in which that state had accused it of failing to disclose loan terms and conditions to at least 53 borrowers. In agreeing to pay $150,000, including $125,000 in restitution, Coast did not admit liability, but pledged to comply with all applicable state and federal laws.
First Alliance was rocked in May by the AARP’s announcement that it would seek to become co-plaintiff with individual borrowers who had sued the firm for allegedly charging “unconscionable” fees.
