The majority of bankers and mortgage brokers hit with prohibition orders by the Missouri Division of Finance this year were doing business in the Ozarks when their alleged indiscretions were uncovered.
Four of the five orders issued this year came down on professionals in the Springfield area.
All three prohibition orders issued in July by Commissioner of Finance Eric McClure involved three former loan officers operating in the Springfield metropolitan area: Jamie Schmidt at Empire Bank, John Vacey at Life Mortgage Services and Prentice Hancock at Mid-Missouri Bank. Hancock has publicly contested the disciplinary action, and Vacey, of Nixa, said he wasn't sure what prompted the order against him or whether he would appeal. Schmidt could not be reached for comment.
Under Missouri law, the finance commissioner may issue prohibition orders against any employee of a state-chartered financial institution who has broken the law, violated terms of a cease-and-desist order or engaged in "unsafe or unsound" banking practices.
Orders also may be issued if an investigation reveals that a mortgage broker submitted documents to financial institutions that contain "multiple willful and material misstatements of facts."
Although short of criminal charges, prohibition orders can be devastating to one's career; they banish individuals from working for state-chartered financial institutions or state-licensed mortgage brokerages and are posted online at www.missouri-finance.org.
Deputy Commissioner of Finance Rich Weaver said the orders, which do not publicly detail the allegations or evidence against the banker or broker in question, shouldn't be taken lightly. Some are directly related to apparent mortgage fraud, he added.
"We would not issue a prohibition for somebody making a mistake," Weaver said. "These would have to be willful material misstatements of fact and misrepresentations. We would only take this action against very serious offenders."
Some seek recourse
Hancock responded to his July 21 prohibition order with a prepared statement, in which the former loan officer at Mid-Missouri's Bolivar branch said he "did nothing wrong" and characterized himself as a "fall guy" for higher-ups at the bank.
"The division finding is nothing more than acknowledgement that I unfortunately was the loan officer on a substantial loan, and followed the banking practices approved and or instructed of me by upper management," Hancock said in the statement.
"As I did what I was told, and acted consistent with Mid-Missouri Bank practices, I strongly disagree with the finding."
Hancock's name recently surfaced in a lawsuit filed by Mid-Missouri against Independence developer Major Hammett II in Polk County Circuit Court.
Hammett borrowed more than $5 million from the bank to develop real estate in Bolivar and later defaulted on the loans, according to the suit.
Jay Kirksey, Hancock's Bolivar attorney, said his client was the victim of the alleged fraud scheme laid out in the lawsuit.
"The division findings did not find that Prentice had done anything that was unethical, dishonest or immoral," Kirksey said.
"The basis of the division's findings was a failure of prudent banking practices, and prudent banking practices are often in the eye of the beholder."
Kirksey said Hancock still intends to appeal to the finance commissioner - part of the due process afforded to anyone who receives a prohibition order.
If the commissioner reaffirms the ruling, bankers and employees of financial institutions may seek recourse in civil court, Weaver said.
Mortgage brokers, however, have the option to appeal to the Mortgage Broker Board before pursuing litigation, although Weaver said the board is rarely convened and has never overturned the commissioner's decision.
Focus on mortgage brokers
Prohibition orders against mortgage brokers in the Springfield area have become a more regular occurrence in the last year or so, mainly due to alleged mortgage fraud schemes, Weaver said.
Springfield Business Journal first reported in February 2007 that local FBI and Internal Revenue Service officials were investigating the alleged fraud schemes, which seek to defraud lenders by inflating home values. Weaver said prohibition orders against local mortgage brokers were largely driven by complaints or referrals about suspected fraud activity.
When the division receives a complaint alleging mortgage fraud, an examiner reviews the pertinent loan documents and may launch a full-scale investigation, Weaver said. The most egregious cases are met with a prohibition order, he added.
"We realize we're taking away someone's livelihood, so we would not just do this at a drop of the hat," Weaver said.
Since July 2007, the division has issued prohibition orders against six mortgage brokers in the Springfield area: Shirley Burk and Randy Hall were employed at Choice Mortgage, which no longer has a working phone number; Vacey and Kevin Flanigan worked for Life Mortgage Services; and Scott and Cheryl Kassebaum are the registered agents for MO Star LLC and Mid-America Homes LLC, respectively.
Empire Bank has seen two ex-employees on the receiving end of prohibition orders this year; Schmidt's came from the state, and Deborah Levesque received one from the Federal Deposit Insurance Corp. in February.
"In neither case was there mortgage fraud involved," said Russ Marquart, Empire Bank's president and CEO, declining to discuss details of incidents due to the orders' confidentiality clauses.
"And at no time were any customer funds or deposits involved. There was no loss of funds by any customers involving those cases."
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