The Department of Commerce’s Division of Financial Institutions, which regulates mortgage brokers in Ohio, issued orders today notifying Kemper Financial that it intends to revoke its mortgage broker certificate of registration.  Kemper’s president and operations manager Todd Charske was notified that the Division intends to revoke his loan officer license and Kemper employee Gregory B. Romer was notified that the Division intends to deny his loan officer application.  They will have 30 days in which to request an administrative hearing. 

 “The Ohio Department of Commerce is committed to vigorously enforce Ohio’s mortgage broker law,” said F. Scott O’Donnell, Superintendent of Financial Institutions.  “Today’s unified action by federal, state and local agencies sends a clear message to those who conduct fraudulent schemes:  You will be shut down.”

The Division alleges that Kemper, Charske and Romer participated in an elaborate property flipping scheme for the purpose of defrauding lenders and unsophisticated buyers.  The State also alleges that Charske flipped 17 properties in the Dayton area between August 2000 and May 2001.

State authorities allege that properties were purchased and then resold often within a few days at significantly higher prices (usually at least twice the previous price) without substantial rehabilitiation.  The State alleges that Kemper Financial, Charske and Romer committed fraudulent acts to defraud lenders by falsifying the buyers’ tax, employment and financial documents.  As a result, buyers may not have had the means to repay the loans and lenders purchased the loans based on fraudulent figures. 

Commerce’s action was initiated as the FBI executed a search warrant at Kemper Financial’s office today.  The Division of Financial Institutions assisted in the identification of documents at the scene and will continue to assist the FBI in its case against Kemper.

Today’s action is part of the Division’s efforts to clean up the mortgage broker industry.  Other efforts include the enforcement of  Senate Bill 76, a new law that requires loan officers, who are employed by mortgage brokers, to become licensed.  Before this law went into effect in May 2002, loan officers did not need to be licensed.

In addition, the new law provides greater enforcement power and prohibits an individual who has been convicted of theft, forgery or other financial crimes from holding a mortgage broker’s registration or loan officer license.

Governor Bob Taft has instructed the Department of Commerce to use all of its powers to vigorously enforce laws against predatory lending and to stop unfair lending practices in Ohio. 

Commerce’s role in today’s action was coordinated by its new Office of Consumer Affairs.  This office was created in May by Ohio legislators in an effort to reduce the growing number of consumers falling victim to abusive lending practices.  The office is working to educate Ohioans on how to protect themselves in the mortgage lending process, to receive complaints from those who have been victimized, and to act as a referral service to organizations that can assist the borrower.  When lending laws are violated, the office can initiate enforcement action and refer criminal cases for prosecution.

Last week, the Office of Consumer Affairs unveiled its “Borrow Smart” campaign.  The message encourages Ohioans to be aware of abusive lending practices and to “Borrow Smart” by only signing mortgage loan documents whose terms they agree with, understand, and can confidently repay.   

As part of the “Borrow Smart” campaign, the office has established a toll-free Consumer Hotline to receive complaints from those who have been victimized by abusive lending practices and to act as a referral service to organizations that can assist the borrower.   The telephone number for the toll-free Consumer Hotline is 1-866-278-0003.

The Office of Consumer Affairs has also created two new brochures to assist Ohio borrowers.  They are titled:  “Predatory Lending:  Tricks of the Trade and How to Recognize Them” and “Don’t Become a Victim:  A Guide to Predatory Lending.”  The brochures can be obtained through the Department of Commerce’s web site at http://www.com.state.oh.us/ or by calling the Consumer Hotline. 

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The Ohio Department of Commerce’s Division of Financial Institutions regulates Ohio’s state-chartered banks, savings and loans/savings banks, and credit unions.  The division also regulates consumer finance companies.  In addition, the department regulates securities, industrial compliance, fire codes, unclaimed funds, liquor, and real estate, among other industries.  The department’s internet address is www.com.state.oh.us