State punishes Springs mortgage broker in fraud case

Colorado Springs mortgage broker Dave Cortez is being asked to surrender his broker's license and pay $20,700 in fines after his Ascend Mortgage One wrote loans and fabricated documents that led to at least one home foreclosure, the state's top real estate cop said Monday.

Erin Toll, director of the Colorado Division of Real Estate, described the Cortez case as among the most egregious she has handled in the recent mortgage foreclosure crisis.

"I rank this case in our ‘worst offenses' category, if it's all proven to be true," Toll said.

"His actions directly led to one foreclosure and possibly more. His employees were falsifying employment documents which led to lending. That is called mortgage fraud."

Cortez, 45, denied any wrongdoing and said he is a victim of trusting bad employees.

"My name is on some fraudulent files, but I didn't do anything," said Cortez, who was a basketball star at Coronado High School and Colorado College in the 1980s, and now coaches at The Colorado Springs School.

"My crime was not micromanaging the employee who was responsible for this," Cortez said. "I'm not part of any criminal wrongdoing at all. It's a fraud ring that my company got caught up in. The perpetrators have told the state I had nothing to do with it other than running the business."

Cortez was cited in a 10-page investigative report for allowing three unlicensed employees to write loans that he later signed. Cortez admitted to the state, and to The Gazette, that he signed the documents. But he said he didn't know there was anything wrong with the documents.

Toll said her investigators found that several of the loan packages included "fabricated employment documents," which led lending institutions to believe the borrowers made much more money than they did. In fact, the borrowers never worked for the company named in the documents and never would have qualified for the loans they received.

Cortez said he never met the borrowers or saw the documents, but signed them, trusting that his employees were following the law.

Toll called Cortez's actions inexcusable, especially when a broker's first obligation is to protect the consumer. It doesn't matter, she said, that his former employees admitted fabricating documents and preparing loan documents without his knowledge.

"He was signing documents, asking lenders to give hundreds of thousands of dollars to a person he'd never met. That is not trustworthy and not professional."

Toll said Cortez compounded his problems by letting his surety bond lapse in January 2008, meaning there is no insurance to cover him if victims decided to sue. Cortez called the lapse an oversight, as he was selling Ascend and going to work for Evergreen Home Loans.

"Because he had no surety bond, the victims have no recourse," Toll said.

One of those alleged victims initiated the complaint against Cortez last August: Pete Preston, executive director of Mortgage Solutions of Colorado. His company had a client, Katina Scott, who bought a $369,900 house last spring through Ascend Mortgage One.

A routine audit of the April loan led Preston to suspect mortgage fraud in which a "straw buyer" is recruited and paid a kickback to buy, at an inflated price, a house that she never intend to live in.

In typical schemes, the builder, broker, appraiser, real estate agent and title company all might split the profits from the sale while the house slips into foreclosure, leaving the lender to absorb the loss and the buyer with ruined credit.

Scott and her sister, Belinda Gardner, told The Gazette last August they were involved in just such a scheme when they bought side-by-side new houses on Fossil Butte Drive on the city's northeast side.

Gardner later lost her house to foreclosure. In an effort to protect Scott's credit, Preston agreed to take back her house and resold it, losing $75,000 on the transaction.

Preston said he recognized the scheme because he had seen a Gazette investigation on nearby Balsam Street in which five houses were sold under similar circumstances.

Last month the Colorado Real Estate Commission voted to ask Stephen Teegardin, of Teegardin Realty & Investments, to surrender his license and pay a $25,000 fine for his "dishonest dealings" and "unworthiness or incompetency" in the Balsam Street sales. The commission also asked for the license of his son, Robert B. Teegardin, and fined him $20,000.

Preston said he's gratified to learn that the state is aggressively pursuing Cortez, regardless of his direct involvement in the loans.

"I can't lock myself in the basement while my kids run amok in the neighborhood then claim I didn't know," Preston said. "Putting your name on a document creates a responsibility. It's good to know the state is taking things seriously."

Toll said Cortez was to decide by Monday whether to agree to the license revocation and fine or seek a hearing before an administrative law judge. Cortez said he'd been given until week's end to decide, and he was undecided.

"We expect to have a full settlement by the end of the week," he said. "I didn't do anything willfully and did not benefit from it. I'm not built that way. But I have to answer for it. I own the company the loans came through. I didn't do anything on purpose. I don't think any penalty is warranted."

If Toll's office is unable to negotiate a settlement with Cortez, the case will be turned over to Colorado Attorney General John Suthers for possible civil action. It would be up to the Fourth Judicial District Attorney's office to pursue criminal charges for mortgage fraud, Toll said.

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Call Vogrin at 636-0193

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DETAILS

In typical schemes, the builder, broker, appraiser, real estate agent and title company all might split the profits from the sale while the house slips into foreclosure, leaving the lender to absorb the loss and the buyer with ruined credit.