Mesa mortgage company forced to shut doors

State regulators have ordered a Mesa-based mortgage company with more than 75 branches Valleywide to close up shop, citing numerous questionable lending practices.

In an order issued Feb. 14, the Arizona Department of Financial Institutions accused the company of dozens of questionable loan actions, money transactions and hiring practices by Eagle First Mortgage Corp. The company, which is headed by David T. Sanchez, must wind down all existing loans by March 14.

The company franchised itself out to the point that “there was no control over the branches,” said Felecia Rotellini, superintendent of the state financial institutions department.

“That’s a recipe for loan officers being tempted to engage in mortgage fraud,” she said.

The state agency, which regulates mortgage brokers and bankers, investigated Eagle First in May and June of last year.

Its findings included the following activities by the East Valley firm:

• Contracting with or paying out nearly $2.5 million in compensation to unlicensed, independent contractors.

• Hiring employees without conducting appropriate background checks.

• Not maintaining records of all completed loan applications.

• Making misrepresentations or concealing facts about transactions.

This wasn’t the first time Eagle First had run into trouble with regulators. The state financial institutions department charged the mortgage company with 10 violations in 2004.

Sanchez, who is the company’s president and broker, did not return calls to the Mesa firm’s main office on Monday.

A message from Sanchez on the company’s Web site stated, “As most people know I have agreed to shut down Eagle First Mortgage. The Department of Financial Institutions was gracious in allowing loans not yet closed to continue closing so as to not hurt the borrowers ... I want to thank the thousands of clients that have done business with Eagle First Mortgage over the years.”

Sanchez started up the company in early 2003, Arizona Corporation Commission records show.

The state financial institutions department is continuing to investigate loan officers at Eagle First and at other companies, Rotellini said.

The agency oversees more than 4,200 companies, roughly half of which are connected to the mortgage industry, she said. The department has two investigators focused specifically on mortgage fraud. It also partnered up with other federal and state agencies last fall to create a mortgage fraud task force.

Fraud has become a growing concern throughout the mortgage industry with the number of lending companies exploding in recent years, said Chris Mozilo, president of the Arizona Mortgage Lenders Association.

When interest rates were low and home prices were escalating, much of the fraud going on was masked, Mozilo said. Now, with prices on the decline, some of these fraudulent practices are coming to light, he said.

Mozilo added that he thought the state financial institutions department was doing a good job trying to regulate thousands of firms with a small staff. “I’m glad to see at least the beginnings of some of the bad actors getting flushed out of the industry,” he said.