SEC Acts Against L.A.-Based Mortgage Brokers
The Securities and Exchange Commission charged five Los Angeles-based mortgage brokers with fraud, according to a media statement Friday. We here at HW have seen few breaking news stories recently with any kind of precedent in the changing economy, but this one really left us scratching our heads: Since when does the SEC take action against mortgage brokers? Answer: Since illicit practices led some brokers to refinance borrowers' homes with subprime mortgages they couldn't afford and then sell "unsuitable securities" to those borrowers. The five brokers listed in the SEC complaint include Guillermo Haro, Kederio Ainsworth, Jesus Gutierrez, Gabriel Paredes and Angel Romo. The representatives, all registered with World Group Securities Inc., took high commissions on both the subprime mortgages and the securities, which were primarily universal life policies, according to the SEC. The refinancing of borrowers' homes generated both "short term savings" between the old and new mortgage payments and equity removed from the investors' homes, according to the formal complaint filed by the SEC against the brokers. The borrowers -- who lacked formal education, investment experience and often did not speak English -- could not afford to purchase the securities without refinancing or to maintain payments on the securities after their mortgage rates adjusted, the complaint read. "Not only was the whole scheme fraudulent, but the brokers profited by charging commissions at each stage," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "The SEC will relentlessly pursue unscrupulous brokers and other securities industry professionals who seek to line their own pockets at their customers’ expense.” The SEC said it is seeking injunctions, disgorgement and financial penalties for the brokers' fraudulent actions. Editor’s note: To contact the reporter on this story, email firstname.lastname@example.org.