State Regulators Take Action Against Orange County Loan Broker; Department of Corporations Issues Orders to Prevent Excess Interest Charges

Business Wire, August 18, 1998

LOS ANGELES--(BUSINESS WIRE)--Aug. 18, 1998--Commissioner of Corporations Dale E. Bonner Tuesday announced that the Department of Corporations has ordered Irvine-based DiTech Funding Corp. to stop violating state lending laws and refund excess interest charges made to borrowers in first and second trust deed loans.

"Borrowers in the mortgage loan marketplace have a right to expect that they will be treated fairly and honestly by lenders licensed by the state," Bonner stated. "Exploitative and predatory loan practices will not be tolerated."

DiTech was licensed under the California Residential Mortgage Lending Act on July 23, 1996, and has offices in Arizona, Illinois, New Jersey and California.

DiTech was found, during a regulatory exam, to be charging interest to borrowers from the date the loan was approved but before the closing of the escrow on the loan, allowing excess charges ranging from two days' to two weeks' interest. The escrow company used was found to be an affiliate of DiTech.

"Our examiners found overcharges in 79 percent of DiTech's second trust deed loans and 29 percent of their first trust deed loans," Bonner stated. "This demonstrates a pattern of non-compliance with the law which is unacceptable."

The orders issued require the company to audit all loan files and refund all excess interest charges plus 10 percent interest as a penalty. The orders also require the company to implement procedures to prevent overcharges on any future loans and prohibit any future violations.

The Department of Corporations regulates the California Residential Mortgage Lending Act, which authorizes licensees, known as mortgage bankers, to make federally related mortgage loans, sell them to institutional investors and service such loans.

The Department of Corporations is a licensing and regulatory agency reporting to the Business, Transportation and Housing Agency and to Gov. Pete Wilson.

CONTACT: Department of Corporations

G. W. McDonald, 213/736-3704, 213/736-2117 (fax)

Julie Stewart, 916/323-7120, 916/322-3205 (fax)