Mortgage Lender Collapse Hurts Lee County Home Builder, Raises Questions

A Michigan mortgage company has collapsed after making several hundred questionable loans to buyers of First Home Builder houses in Lee County.

Meanwhile, some buyers have filed suit against First Home, the credit union and others — alleging myriad fraud and conspiracy in the marketing, sale and financing of the homes, according to the News-Press.

The National Credit Union Administration on February 16 assumed control of the Ann Arbor-based Huron River Area Credit Union, which has 39,000 members and $348 million in assets.

The credit union also made loans for building houses that may not be worth the full amount of the Florida home loan after the housing market collapsed last year, say those involved.

“We aren’t going to comment on the extensions of credit by the credit union,” said John McKechnie, director of public and congressional affairs for the credit union administration.

But Fort Myers-based attorney Richard Ingalls said he has at least five clients with contracts to buy First Home houses that are worth far less than the amounts of the construction loans.

Often they have no way to close on their houses because they can’t get permanent financing for the full Florida mortgage and can’t make up the difference, he said.

“These are people who initially got into these investments with good credit scores but not many assets,” Ingalls said.

The credit union is involved in an ongoing investigation into the circumstances of Huron’s financial problems, McKechnie said, but he declined to elaborate.

Chief Assistant U.S. Attorney Doug Molloy said he never comments when “things are at this stage.”

He said he is “aware of that set of facts” surrounding Huron’s problems.

Larry Sorsby, CFO of Hovnanian Enterprises — parent company of First Home — said “up until two or three weeks ago we had no idea Huron even existed. We had no direct dealings with Huron; we were dealing with a local mortgage company that I guess made the loans and may have assigned them” to Huron.

That company, Construction Loan Company Inc., is based in Howell, Mich., at the same address as a Huron branch. Officials at Construction Loan weren’t available for comment Monday.

Sorsby said he doesn’t think any fraud occurred.

“What we’re faced with is a classic situation where the Southwest Florida housing market experienced an intense boom” and then collapsed, leaving prices lower than what some had agreed to pay, he said.

Still, at least six lawsuits have been filed by people alleging mortgage fraud by First Home, Construction Loan and D’Alessandro & Woodyard, a real estate brokerage that sold some houses for First Home.

Michael Timmerman is the Naples housing market-based managing director for Florida at Hanley Wood, a national company that collects and analyzes data for home builders.

Timmerman said that if a substantial number of the mainly moderately priced homes involved experience Florida mortgage loan foreclosure, home prices likely would come down for that sector of the housing market.

That effect probably would not spread to more expensive homes, he said. However, Timmerman said there will be a lot of shaky Florida home loans at all levels of the market.

“I think we’re going to see more distressed sales in 2007,” he said.

SOURCE: The News-Press