Michigan Regulators Place Mortgage Company Into Conservatorship

l Michigan-based mortgage company has been placed into conservatorship following regulators' discovery that the company had been improperly servicing its mortgages. Office of Financial and Insurance Regulation (OFIR) Commissioner Ken Ross has placed Northwestern Financial Corp. of Wixom, Mich., into conservatorship and named OFIR Director of Receiverships James Gerber as conservator. Ross has also directed that the company cease and desist from doing business. The company was servicing 156 mortgages in the state at the end of last year. "Our examiners found that Northwestern Financial failed to service these loans in accordance with the servicing contracts, so we shut them down," Ross says. This is the first time since 1999 that the OFIR has placed a mortgage company into conservatorship. According to Ross' [link=http://www.michigan.gov/documents/dleg/Northwestern_Financial_Corp._-_Order_Appointing_Conservator_281775_7.pdf][u]order[/u][/link], the OFIR received complaints that Northwestern was not remitting payments to investors. A review by OFIR staff found that the company's records were located at the personal residence of John P. Collins Jr., president and owner of Northwestern. Regulators also determined that Collins ‘had not maintained adequate records pertaining to disbursement of funds escrowed for properties’ that Northwestern serviced. The company's files failed to contain invoices for payments Northwestern allegedly made to contractors for work performed on properties, the order says. Collins and other Northwestern employees had been using repair escrow account funds to pay utilities, credit card bills and other miscellaneous expenses. Furthermore, the OFIR discovered that Collins had commingled his personal finances with those of the company's escrow account. Collins, it turns out, is also the borrower on multiple loans that Northwestern services. Acting as landlord for the properties, Collins was found to be channeling rent payments into the escrow account. Collins has admitted that he stopped making payments on some of his loans and, in turn, investors had not been paid. ‘Many of the accounts [that Northwestern manages] had negative balances, when Northwestern should have an aggregate balance of at least $247,654.21 in the escrow account,’ the report says. ‘In fact, [Northwestern] has approximately $17,000 in the escrow account.’ SOURCE: Michigan Office of Financial and Insurance Regu


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