Most banks that have been prosecuted during the mortgage crisis had been repackaging bad loans and telling investors they were good.
Not First Mortgage Corp., a now-defunct Ontario mortgage lender. First Mortgage did the opposite: selling good loans as bad.
As a result of a civil fraud case initiated by the Securities and Exchange Commission, First Mortgage agreed to pay $12.7 million to settle
What First Mortgage did was tell its investors that some borrowers had not paid their mortgages for months when the company had indeed received the payments, but did not deposit them. This allowed First Mortgage to repurchase those so-called bad loans at a discount, after which they deposited the payments and resold the loans at full price to other investors.
According to the SEC, First Mortgage and its executives made profits of $7.5 million by playing this charade with hundreds of mortgages between 2011 and 2015.
The company and six executives, including its president Clement Ziroli Jr. and his father, Chief Executive Clement Ziroli Sr., agreed to pay to settle the case, but they did not admit wrongdoing.
Read the original article in the Los Angeles Times.