Lender Takes Harder Line with Brokers on Fraud

American Banker author Kate Berry reported today ( click here ) that Kamran Khosravi, the president of American Guardian Financial Group Inc., says his alternative-A and subprime lender has recovered $2 million this year from mortgage brokers who originated fraudulent loans.

The privately held Lake Forest, Calif., wholesaler says it is pursuing fraudulent brokers and sharing their names and information with federal, state, and local authorities. Its legal division is suing brokers who refused to repay the company for losses on fraudulent loans.

“We are managing our liabilities by going after every broker engaged in fraud,” Mr. Khosravi said in an interview last week.

“All of the early-payment defaults we have had, had some kind of fraud, so we’re going back to the brokers and making them either put the houses back on the market or refinance out of our loans.”

Regina M. Lowrie, a former chairman of the Mortgage Bankers Association who recently started the Blue Bell, Pa., lender Vision Mortgage Capital, said it is unusual for lenders to track down fraudulent brokers, largely because of the cost.

“It’s just not that common in the industry for a lender to go directly after brokers, because most firms don’t have the resources to do it,” said Ms. Lowrie, a former consultant and principal at Prieston Group, a mortgage fraud insurance and loss mitigation provider in Novato, Calif.

“The lenders that are insuring their loans for material misrepresentation due to fraud generally do not have the resources to go after the bad actors — whether it’s brokers, closing agents, title agents, closing attorneys, or appraisers,” she said.

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