WRAL Investigates

N.C. consumers get $21M after mortgage fraud accusations

Approximately $21 million is back in the hands of North Carolina consumers. Four big mortgage companies paid the money after being accused of fraud.

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SANFORD, N.C. — Approximately $21 million is back in the hands of North Carolina consumers. Four big mortgage companies paid the money after being accused of fraud.

Angela Farnsworth’s house in Sanford was one of the many teetering on the edge of foreclosure. Then she received a letter in the mail saying that her family would be receiving $26,000.

"I thought (the letter) was a fake," she said.

The money is coming from the people who handled Farnsworth’s mortgage. WR Starkey Mortgage is writing checks to 171 North Carolina families. The company is accused of using inaccurate credit information to get people loans and working with a home dealer to inflate the prices of manufactured homes.

“We never attempted to avoid our responsibilities, which is reflected in our rapid and significant settlement with the State authorities,” John Aspinwall, who was recently named CEO of WR Starkey, said in a statement.

"The majority of the allegations in the proceedings centered upon the conduct of a few former Company employees and representatives of Phoenix Housing Group, Inc., the seller of the manufactured homes," the statement continued.

WR Starkey, which is headquartered in Plano, Texas, does business in 13 states, according to the company. It has branches in Charlotte, Cornelius, Greensboro, Hickory, Mooresville, Lenoir, Matthews, Raleigh, Salisbury, and Winston-Salem.

Farnsworth says she was promised a $900-a-month payment, which jumped to more than $1,000 and then jumped again.

“When we went into closing, we found out the mortgage was for $172,000, and our payment jumped from $1,100 to more than $1,300 a month,” she said.

WR Starkey doesn't admit or deny the charges, but agreed to pay a total of $4.7 million to move on. The case isn’t all that unusual. The state has gone after and collected on a number of mortgage fraud cases.

“This type of activity is what contributed greatly to the problems with the stock market and the downfall of the housing market in the United States,” said North Carolina Attorney General Roy Cooper.

The Attorney General's office and the Commissioner of Banks worked to collect money from WR Starkey. They've collected from others, too, including $2.5 million from Beazer Mortgage, $2.8 million from Vanderbilt Mortgage and $11 million from Countrywide Homes.

Cooper says problems linger because they aren't quickly detected.

“It’s very labor intensive to do these investigations because of the paperwork and the number of parties involved,” he said.

Cooper won't say how many investigations are still active. Meanwhile, Farnsworth said she hopes this is the end of her trouble.

WR Starkey Mortgage announced a number of changes with its settlement – the CEO resigned, the president was removed and an outside group was hired as a compliance watchdog.


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