Taylor Bean Suspended From Making FHA Loans By JAMES R. HAGERTY and LINGLING WEI - WSJ

Taylor Bean Suspended From Making FHA Loans By JAMES R. HAGERTY and LINGLING WEI - WSJ

Taylor Bean Suspended From Making FHA Loans
Move Follows Raid at Lender's Headquarters as Agency Probes Business Practices, Disclosures Amid 'Concerns of Fraud'
Wall Street Journal
August 5, 2009

The Federal Housing Administration suspended Taylor, Bean & Whitaker Mortgage Corp. from making loans insured by the federal agency, and raised questions about the company's business practices and financial disclosures.

The move, coming a day after federal investigators raided Taylor Bean headquarters in Ocala, Fla., could hamper the company's operations and deal a setback to hundreds of mortgage brokers and community banks that originate loans through Taylor Bean.

Colonial and Taylor Bean Offices Raided The Department of Housing and Urban Development, which oversees the FHA, said it took action against Taylor Bean because the company failed to submit a required annual financial report and to disclose "certain irregular transactions that raised concerns of fraud." Officials declined to provide details about the possible fraud. Taylor Bean has 30 days to appeal the suspension, which took effect immediately.

HUD also proposed to bar two Taylor Bean executives -- Paul R. Allen, chief executive officer, and Ray Bowman, president -- from any dealings with the U.S. government for 18 months. The department said Mr. Allen submitted false or misleading information to Ginnie Mae concerning a delay in submitting financial reports. It said Mr. Bowman submitted two false certifications regarding information lenders are required to verify each year. Neither Mr. Allen nor Mr. Bowman could be reached for comment. They have 30 days to contest the proposed penalty.

Taylor Bean's headquarters in Ocala, Fla., were raided Monday by federal investigators. The company is the 12th-largest mortgage lender in the U.S.
In an email response, Lee B. Farkas, chairman of Taylor Bean, said he was unaware of the FHA action. He didn't return repeated requests for comment.

FHA officials said Taylor Bean, which originated and purchased nearly $30 billion in mortgages last year, is the largest lender ever to be suspended from FHA lending. The company is private, but Taylor Bean was the 12th-largest U.S. mortgage lender in the first six months of this year, according to Inside Mortgage Finance, a trade publication. Though Taylor Bean makes most of its home loans through independent brokers and smaller mortgage banks, the Florida lender also owns a small savings-and-loan company, Platinum Bancshares Inc., of Rolling Meadows, Ill., acquired last year.

Among originators of FHA loans, Taylor Bean was the third largest in June, with a market share of 3.3%, according to the publication. Only Bank of America Corp. and Wells Fargo & Co. were larger.

The crackdown on Taylor Bean comes as the FHA is straining to cope with an increase in the number of loans it backs and rising delinquencies on those loans.

"Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world: Operate within our standards or we won't do business with you," said HUD Secretary Shaun Donovan. In an interview this year, Mr. Donovan didn't rule out the possibility that the FHA eventually may have to seek money from Congress for the first time to cover losses on defaults. The number of loans delinquent more than 90 days or more backed by the FHA rose in May to 7.42% from 6.47% a year earlier.

Ginnie Mae, a government agency that guarantees payments to holders of securities backed by FHA loans, said Taylor Bean will no longer be allowed to issue securities backed by Ginnie.

On Monday, federal agents raided the Florida offices of Colonial BancGroup Inc. and Taylor Bean. The special inspector general for the Troubled Asset Relief Program said its agents had executed search warrants at the two offices in conjunction with the Federal Bureau of Investigation and the inspector general for HUD. A spokeswoman for the TARP watchdog said the warrants were sealed and she couldn't provide details about the probe.

Taylor Bean had proposed to lead a group of investors that were to provide $300 million of capital to Colonial, allowing the Montgomery, Ala., bank to become eligible for a $550 million federal bailout. But Colonial said Friday that the proposed rescue fell through. Also on Friday, Colonial reported a loss of $606 million for the second quarter and said there is "substantial doubt about Colonial's ability to continue as a going concern." Taylor Bean has depended on short-term "warehouse" loans from Colonial. Warehouse lenders are big banks and others that make short-term loans to mortgage banks.

HUD officials and the TARP watchdog teamed up in the federal investigation when they found they both had concerns about Taylor Bean and Colonial. HUD said Taylor Bean had failed to disclose to the FHA investigations into its business practices by state authorities. In July, Taylor Bean signed an agreement with 14 states requiring it to pay fines totaling $9 million for alleged improper lending practices, including alterations of information about borrowers' incomes and assets to allow loans to be approved.

A person involved in the federal probe said Taylor Bean had told Ginnie Mae that a delay in filing was due to the planned investment in Colonial. Later, however, Ginnie Mae discovered that Taylor Bean hadn't disclosed that its independent auditor, Deloitte LLP, had resigned because of "irregular transactions" that raised concerns about fraud. A spokesman at Deloitte declined to comment.

Colonial's financial problems have stirred worry in the mortgage market because the bank is one of the nation's largest providers of short-term credit to small, independent mortgage banks. These mortgage lenders have found it hard to obtain the short-term loans they need to allow them to fund home mortgages. If Colonial exits the warehouse-lending business, that would be "devastating" for many mortgage banks, said Scott Stern, chief executive officer of Lenders One, a St. Louis cooperative that provides services to about 135 mortgage banks across the U.S.

James Lockhart, director of the Federal Housing Finance Agency, said in an interview Monday that he expects an announcement this month that Fannie Mae and Freddie Mac will provide support to "warehouse" lenders. Mr. Lockhart said the aid would involve the use of commitments by Fannie and Freddie to purchase loans that serve as collateral for warehouse lines of credit.

The Property Report
Deal of the Week: Pension Funds Jump Into Real Estate Plots & Ploys: Trumping Bondholders? Partly because of a plunge in the number of providers of warehouse credit lines, small mortgage banks have found it more difficult to compete with big banks in making home loans. The top three mortgage lenders accounted for 52% of the market in the first quarter, up from 40% a year earlier, according to Inside Mortgage Finance.

If small mortgage lenders continue to abandon the business, "it will mean fewer choices for the consumer and higher mortgage rates," said Glen Corso, a spokesman for the Warehouse Lending Project, a group of about 35 mortgage banks pushing for federal aid to encourage more warehouse lending.

An increase in FHA lending has raised concerns in Congress and elsewhere that the agency will lose large amounts of money through mortgage defaults. FHA officials depicted the crackdown on Taylor Bean as a sign they are being vigilant.

Taylor Bean hasn't been an approved lender by Fannie Mae for more than five years. Colonial had a loss of $880.5 million in 2008, hurt by its exposure to Florida's real-estate collapse. When the bank said on Dec. 2 that it had preliminary approval for as much as $536 million in federal aid, it didn't tell investors it needed to raise $300 million privately to secure the government funds. That disclosure came on Jan. 27. Nick Timiraos and Dan Fitzpatrick contributed to this article.


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Mortgage Scam involving Taylor Bean

Earlier this year, Christopher Jared Warren posted an online confessional.
He said he had helped ruin the U.S. economy. At 26, he described how he had gotten rich off of lies, and how he and his colleagues had defrauded mortgage holders of millions. He asked for mercy.
Then Warren split. Using a fake name, he chartered a plane to Beirut, Lebanon, and a five-star resort on the Mediterranean Sea. Five days later, he tried to come back, but Canadian border patrol officers arrested him — with $70,000 in cash and 4 ounces of platinum in his cowboy boots.
When a $100 million mortgage scam involving Warren exploded weeks later in Sacramento, Calif., the federal government's indictment highlighted one wholesale mortgage lender in particular that Warren had defrauded: Taylor, Bean & Whitaker of Ocala.
• • •
Taylor Bean, the FHA lender that fell apart and put 1,000 employees in its Ocala headquarters out of work this week, lost $7 million to Warren and his colleagues.
It's unclear what role Warren's scam played in triggering a broader investigation into Taylor Bean or expediting its demise. Indeed, Taylor Bean's woes were much deeper: Federal agents said the company had "irregular transactions" that raised concern about fraud.
But the relationship between Taylor Bean and Warren's company, Triduanum Financial Inc., sheds light on how the system worked, or rather didn't work. The combination of a shady mortgage lender and a lack of oversight from the company that bought its loans turned into a toxic mess.
Taylor Bean relied heavily on brokers and "correspondent" lenders — like Warren's company — to originate their mortgage loans. Then, as a wholesale mortgage lender, Taylor Bean financed the loans by tapping into a line of credit with other financial institutions. Its chief source: the now deeply troubled Colonial BancGroup.
Taylor Bean dealt with many loans that banks wouldn't touch. It was one of the few lenders handling FHA loans for manufactured homes. In the first half of 2009, when many banks were tight on lending, Taylor Bean approved $17 billion in mortgage loans and was the third-largest FHA lender in the country.
• • •
Warren's seven-page essay, posted on his mortgage company's Web site, detailed his life as a mortgage "fraudster."
In it, he said he was 19 when he was hired at the now-defunct Ameriquest Mortgage Co. His "predatory" division focused on refinancing homeowners who had obtained loans in the past two years.
He became a top-producer. Most months, he sold $5 million in high-interest loans and earned $30,000. "My managers and handlers taught me the ins and outs of mortgage fraud, drugs, sex, and money, money and more money," he wrote.
His manager, a friend, handed out the crystal methamphetamine to keep loan officers up and at work longer hours, he wrote. In between trips to the bathroom to do drugs, he and his colleagues pushed through millions of dollars in loans by falsifying people's incomes.
"A typical welcome aboard gift was a pair of scissors, tape and white out," he wrote.
He even hacked into the Ameri­quest computer to approve his own loans.
At 22, he left the company with its entire customer database and started his own mortgage company. He operated in six states, including Florida, and continued the fraud, faking credit scores and income on mortgage applications.
"As a 22, 23, and 24 year old with no credentials, I made over $2.25 (million)," he wrote, "all of which was spent on 24 cars … 5 houses, drugs, 1 engagement and split, 1 300 person wedding and two kids."
When that company collapsed in 2007, he went to work for another company that federal investigators say was essentially a Ponzi scheme built upon real estate fraud. It stretched through five states, involved about 500 properties and led to $100 million in losses.
According to the Treasury Department, here's how it worked: Warren and other directors of a company called Loomis Wealth Solutions held seminars, luring investors with the promise that they could use their home equity to help them get out of debt.
Initially, investors bought a life insurance policy through Loomis. Then they were enticed to move into higher "tiers" of involvement. In the second tier, investors liquidated their home equity with the promise the money would be invested through Loomis without tax consequences.
The money went into a fund that allegedly would be loaned out to subprime borrowers, giving investors a 12 percent return.
Fund investors received periodic statements that showed their balances increasing by the promised 12 percent. But when regulators seized Loomis' records last August, they discovered the fund, which had taken in millions of dollars, only had about $1,700 in its account.
Last September, Warren began talking to authorities.
"The complete operation was highly illegal," Warren wrote.
• • •
Warren's last company, Triduanum Financial Inc., entered Taylor Bean's universe last October — as the financial services industry was in utter upheaval. Triduanum applied with Taylor Bean to become a CORRESPONDENT LENDER, meaning it could fund and close mortgage loans in its own name and then sell the loans to Taylor Bean within a few days or weeks.
In a two-month period — from Nov. 26 to Jan. 27 — Taylor Bean bought 30 loans from Triduanum that were never actually closed. Warren and a partner redirected $7 million from those loans to gold bullion dealers, a Swedish bank account, a jewelry company and rare coin dealers.
In a lawsuit against Triduanum, Taylor Bean said it was misled from the get-go. Triduanum's application was rife with omissions and lies. But Taylor Bean didn't catch those lies and oversights before it gave the company authority to start making loans.
• • •
When Warren fled the United States earlier this year, his lawyer called it "incredibly idiotic." When he returned, everyone speculated about what he was thinking.
"No one knows for sure what was in his head, why he did that," said Lauren Horwood, a spokeswoman for the U.S. Attorney's Office in California, which is prosecuting the case. "He probably thought he could get away with it. He's pretty arrogant. Smarter than the average person, he thinks."
Warren is now at the Nevada County Jail in Nevada City, Calif., awaiting trial on charges that include money laundering and identity theft.
"Built a fraudster by my trainers in corporate America. Mastered the fraud. Trained others in the fraud," he wrote in his essay, "and it utterly disgusts me."
In that same essay, Warren said the answer to mortgage fraud was better trained regulators. Instead of focusing on prosecutions, he said, put more qualified people in the business of regulating the mortgages at the outset.
"I am the man for the job, Chris Warren … "

Delusional and narcissistic

Instead of focusing on prosecutions, he said, put more qualified people in the business of regulating the mortgages at the outset.
"I am the man for the job, Chris Warren … "

Wow, he admittedly pillaged millions (possibly billions?) from other companies, honest individuals and US tax payers, but blames his actions all on the people who showed him the ropes... then, after he is caught he says everyone should just forget about prosecuting him and those like him and instead give them a job that is beholden to only those with integrity.

What a piece of work. He might be able to plead insanity if this is really his thought process.

What no one in Justice Dept will own up to is that this financial white collar crime needs to be prosecuted - from the mortgage companies to Wall Street. Otherwise there is no risk for dirtbags not to try to game the system. What these people fear is losing their freedom, not money - because they can always make more with another financial scheme if things go bottoms up. That, and you know they stashed plenty away to stay cozy once it went bust.

I would rather see the folks who brought the country (and possibly the world) to the brink sit in prison for 10 to 20+ years then a guy who sold drugs to another consenting adult. Not that the latter is not something serious, but it puts it into perspective - 300 million (to 6 billion) people unknowingly getting taken down with the misdeeds of some proverbial pigs at the trough and nothing happens, versus a guy who may arguably aid in the downfall of a few. Let the punishment fit the crime for Pete's sake.

Taylor Bean

I just talked to my "new" mortgage lender litterly an hour ago about them taking over my mortgage from Taylor Bean. I wish I would have seen this post on 8/7 when it was created. Maybe it would have saved me from all the phone calls I've been involved in recently!!!

Live and learn I guess



Sunset Real Estate Investments Inc.


Good luck on your future deals. Each day we learn about an ever changing market and people in the market. The key sometimes is to try to stay a step ahead and keep going forward even through we hit some bumps along the way. Good luck with your future real estate deals! Believe and Achieve! Smiling - Joe


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