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State banking regulators have shut down a mortgage lending network that slipped past state regulation for years by selling sham licenses to unlicensed brokers and charging illicit fees to homeowners.
North American Real Estate Services operated out of Florida, Nevada and California under a variety of fictitious names and made home loans in North Carolina operating out of Durham, Wake Forest, Wilson and possibly elsewhere. In a nationwide scheme, NARES hired local salespeople who were not certified by the state to process home loans.
The N.C. Commissioner of Banks fined the company and its officers $320,000 and ordered them to refund nearly $62,000 in illegal broker fees that had been paid by 13 borrowers in North Carolina. The amount and the list of customers could increase as other homeowners come forward.
“These companies wanted to operate without any supervision at all,” said Mark Pearce, deputy commissioner of banks. “They could keep more of the fees than doing it the legitimate way.”
State residents who purchased or refinanced their homes through NARES or its shell companies may be eligible for compensation for the fees they paid to the unlicensed brokers. Their loan closing statements would list the name of the mortgage broker who handled their loan, as well as the amount of the service fees they were charged.
A typical mortgage fee is several thousand dollars, between 1 percent and 2 percent of the home loan, but NARES brokers sometimes charged double the standard rate, Pearce said. The highest illicit fee regulators found in this state was $88,625 for the sale of a $2.2 million property in Waxhaw, near Charlotte, or about 4 percent of the value of the home loan. State law only allows regulators to seek refunds for service fees on mortgages of $300,000 and less.
The commissioner of banks does not expect NARES to pay the fine or refund any money, but NARES had paid a $150,000 bond to the state, which regulators hope to obtain from the bond company and use to make customer refunds.
It's not clear how many brokers worked without a license, and how many home loans they processed in this state. The full extent of the scheme is unknown because the company told state investigators it had lost the documents. The investigators logged 118 hours and traveled more than 1,000 miles throughout the state to put together their case.
Neither the company's officers nor their lawyers appeared in Raleigh to defend the organization at the December hearing against the banking commissioner's charges.
The banking commissioner last month revoked NARES' mortgage lending license, which was issued in 2002. According to state regulators, NARES operated under a variety of names, such as Pacific Bancorp, Americawide and North American Home Loans, to cloud its identity.
There's no assurance the company won't return in another guise, but Pearce said it would have a harder time doing business here because it doesn't have a state-licensed entity.
Regulators were tipped off to the scheme when brokers complained about the fees NARES charged them, in one case $8,495 for a fake license. NARES also charged the brokers $500 to create clean loan documents showing the name of a licensed broker.
A legal mortgage brokers license in North Carolina costs $1,250, requires 24 hours of education as well as passing a competency test and a criminal and financial background check, Pearce said.
John Murawski: 919-829-8932
