FRM investors fume over lack of information
Ronny Bean heard about Financial Resources Mortgage Inc. through his brother, who knew Donald Dodge, owner of CL&M Inc., the company that originated the Meredith firm’s mortgages. Dodge was from Gilford, where Bean lives.But even with that endorsement, Bean wanted to check out the company. So in early 2006, Bean said he called the New Hampshire Banking Department.At that time, according to Banking Department records, it had just issued an order demanding Financial Resources Mortgage, or FRM, to show cause why its license should not be revoked because of misrepresentation in lending. That case would be ongoing for at least another year.Also at that time, the state Bureau of Securities Regulation had issued its own show cause order relating to a federal lawsuit alleging the sale of unregistered securities.The Banking Department was aware of that Securities investigation because it started while Banking Commissioner Peter Hildreth was head of the Securities Bureau.Indeed, the department faulted FRM in an October 2004 banking exam for not disclosing the securities investigation to the Banking Department.Yet Bean learned none of that, he told NHBR.“Yep, no problems,” he said he was told. “Been in business for almost 15 years.”So Bean, who is on disability because of a struggle with leukemia, invested $125,000 – his life savings – in FRM. The rest of his family ended up entrusting $3.5 million.“This is going to affect our family for generations,” he said. “We are devastated. There isn’t a day that goes by that I don’t get sick to my stomach.”Bean faults the Securities Bureau as well for not being more aggressive about its own enforcement action, which resulted in a $1 million restitution the following year. But since FRM was a mortgage company, he checked with the Banking Department and not securities regulators. ‘Came away comforted’Bean is not alone. There are between 70 and 90 FRM investors now swapping stories, and many of the stories describe how they tried to check the firm out with different state agencies before making their investment. Frank Marino of Meredith also said he checked with the Banking Department, in February 2009, some nine months before FRM went under.“Most specifically, I wanted to determine whether FRM had been the subject of any complaints or lawsuits so that I could decide whether I was just being paranoid,” he said in a written statement to several state agencies, which was passed on to NHBR.Marino, who confirmed but declined to elaborate on the statement, said he was concerned that he wasn’t getting his payments quickly enough and wanted to make sure the company was in good shape before investing any more money with it.That was 18 months after the company paid the $1 million restitution to the Securities Bureau and less than six months after several lawsuits against FRM were brought to the attention of the Banking Department by FRM’s lawyers.Marino said he was told “in no uncertain language that they had only a single complaint against them ever – a complaint by an impatient borrower who said his loan was taking too long to close” and that there were “no reports of any suits against them.”Marino said that he got the “impression that I was getting from the banking office all the information on FRM that there was to get. I came away feeling comforted” about investing with the agency. So he plucked down another $262,000.“The refusal/failure to share relevant information about them to a citizen who had every right to know, and who had every reason to trust them, is simply inexcusable,” Marino said.Banking Commissioner Peter Hildreth said that the department by law can’t give out any information, except pertaining to the number and nature of complaints, and founded orders, not proceedings of other agency, nor the results of confidential bank examinations.He also said he couldn’t respond to specific allegations without looking into them.But it wasn’t just the Banking Department, say investors.Jim and Susan McIlvene said they checked with the Secretary of State’s Corporation Division and found that the company was in good standing. The Securities Bureau, while separate, also is under the auspices of the Secretary of State.“If their own reports recommended that their license be pulled, they should have alerted the Attorney General’s Office. It appears that they didn’t do anything at all,” said Susan McIlvene a Kittery, Maine, investor who lost more than $800,000.“All our retirement is gone,” said her husband Al McIlvene, a former computer industry executive. “We’ve gone from living to just surviving.”Al McIlvene said they know that suing the state over the matter would be difficult, “but there has to be some accountability. There is a moral responsibility to do something about this.”Baron Givens, a Florida attorney, also said he checked with the Corporation Division as well as with the Better Business Bureau, and had no indication that there ever was any problem with FRM.“Everything we checked checked out,” he said. “It really irritates me that the state of New Hampshire had information that would have prevented people from doing business with them that they kept concealed. People have been ruined because of the state of New Hampshire. They have known for years, and absolutely did nothing about it.”Givens doesn’t know whether it’s possible to sue the state. Nevertheless, he said, “They may not be legally culpable, but they are culpable. They failed to do their job.”Bob Sanders can be reached at email@example.com.