An Illinois mortgage company will be placed on probation for 36 months and pay $1.2 million in restitution after a state investigation found that a branch manager defrauded a number of consumers seeking a mortgage.
Diamond Residential Mortgage Company, which is based in Lake Forest, Illinois and has branches in Illinois, Indiana, Michigan, Wisconsin, Missouri, Georgia, Texas, Colorado, California, and Washington, will pay $1.28 million to consumers who were defrauded by Chris Schaller, who ran the company’s Springfield, Illinois branch.
According to Illinois Attorney General Lisa Madigan and the Illinois Department of Financial and Professional Regulation, an investigation found that Schaller originated at least 10 loans that involved fraudulent activities.
The investigation uncovered that Schaller also participated in a scheme that took advantage of at least six consumers, wherein Schaller convinced the borrowers that they were obtaining a mortgage from Diamond Residential, but they were actually signing a contract for deed.
According to the authorities, these consumers unknowingly transferred ownership interest in their property to Schaller.
Additionally, in some cases, consumers did not receive signed copies of their agreements with Schaller.
A little over a week ago, the Illinois Department of Financial and Professional Regulation revoked Schaller’s mortgage loan originator license and handed him a lifetime ban from ever holding a LO license again in the state. Schaller was also ordered to pay a fine of $128,000.
Then, earlier this week, the state regulator took further action against Diamond Residential in coordination with Madigan’s office. Under the joint action, Diamond Residential is placed on probation for 36 months for not properly supervising the branch where Schaller worked.
Additionally, as part of the settlement, Diamond Residential will pay $1.275 million as restitution to the victims of Schaller’s scams. The money will be sent to the AG’s office, which will provide it the victims.
“I appreciate the Department of Financial and Professional Regulation's partnership with my office to root out mortgage fraud at Diamond Residential’s Springfield branch,” Madigan said in a statement. “I encourage people to file a complaint with my office if they think they could qualify to receive compensation.”
In a lengthy statement provided to HousingWire, Diamond Residential said that many of Schaller’s alleged activities took place outside his employment with the company, but the company said that it is working closely with the state authorities to ensure that all affected consumers are compensated appropriately nonetheless.
“The events underlying the settlement were isolated to a single branch under the direction of a single former employee, Chris Schaller, who was promptly suspended and terminated immediately after we completed a thorough internal investigation,” the company said in a statement.
“As the Attorney General’s public statements make clear, we have cooperated with the regulators throughout their investigation. Moreover, DRMC no longer employs any individual identified as being connected to Schaller’s misconduct,” the company continued.
“Collectively, the IDFPR’s and our investigation reveal that Schaller conducted a number of outside activities that may have harmed persons unrelated to DRMC. To a lesser extent, Schaller and certain former Springfield employees working under him may have violated company procedures with respect to as many as nine loans over an 8-year period,” the company said.
“Although the total number of affected loans was small, even one loan written without consumers’ best interests in mind is unacceptable to us. For this reason, and in light of Schaller’s conduct outside his duties at DRMC, we worked closely with the Attorney General and the IDFPR to structure a $1.2 million remediation fund for affected Illinois consumers – including those who were not DRMC customers,” the company added.
The company also said that it has taken steps to improve its compliance management systems and enhance policies and procedures to ensure that similar incidents do not happen again.
“Since inception, DRMC has closed over 35,000 loans valued at $8 billion without incident,” the company said. “We look forward to putting this situation in the rearview mirror as we keep our full focus on serving our valued customers.”