State board’s role in FRM case questioned

Inquiries into the state agencies caught napping while Financial Resources Mortgage Inc. bilked clients of millions of dollars have overlooked the bit part played by the New Hampshire Real Estate Appraiser Board.In 2007, examiners from the state Bank Department reported that FRM contracted with Korkosz Appraisal Services of Hooksett, which provided statements of value for approximately half the residential loans it closed on in the prior 13 months.A year earlier, the appraiser board was warned about Phillip J. Korkosz, the firm’s principal, by one of his former employees. Moreover, although regulators in Maine and Vermont revoked Korkosz’s appraiser’s license in 2007, the New Hampshire Real Estate Appraiser Board did not follow suit until February, 2009.Jane Davis of Manchester became associated with Korkosz in 2005 while completing the education requirements required to qualify as an apprentice appraiser, the first of several steps required to become a fully certified appraiser entitled to appraise property of all types and values.As an apprentice, Davis was required to work under the supervision of a licensed or certified appraiser. She explained that she and Korkosz entered a “business partnership.” Davis agreed to approach mortgage companies and other lenders to drum up business for his firm, and in return Korkosz would supervise her apprenticeship once her education was complete.Davis said that the two soon found themselves at odds. She said that although she lacked the experience to question all of his appraisals, on the occasions they worked together, they often disagreed about the condition and value of properties.”I will never forget standing in the basement of a home in the western part of the state with water up to the top of my boots,” she recalled. Davis said Korkosz told her to ignore the flooded basement, which he did not mention on his appraisal.Furthermore, Davis said that Korkosz took cash from both lenders and borrowers, which she said she suspected was in return for favorable appraisals, and that he bristled when she questioned his conduct.After finishing her education, Davis said she spent two weeks working under Korkosz’s supervision, during which she secured a share of the appraisal work for Regency Mortgage Corp., a Manchester firm with five offices in New Hampshire and Maine. “As soon as I got the business from Regency, I saw the handwriting on the wall. He didn’t need me anymore and let me go,” she said. “He actually did me a favor.”Not long afterwards, Davis received a letter from the state Appraiser Board. Apparently, the board had received a complaint about the only appraisal she performed under Korkosz’s supervision. The letter informed Davis that Korkosz had accepted all responsibility for the appraisal and exonerated her from any liability. She said that she believed Korkosz acted to ensure that the board would not inquire further and interview her about his appraisal practice.Davis said that after reflecting on the letter, she called the Appraiser Board and told the regulators “this man is entirely unethical and will cause problems for you and homeowners,” she recalled. “Watch him like a hawk, I warned them.”Cyndi Hibbard, who became director of the Appraiser Board in 2007, after Davis called, said that she was unaware of Davis’s call and to the best of her knowledge there was no record of it.‘Numerous instances’The Maine Board of Real Estate Appraisers brought a complaint against Korkosz in December 2005 and revoked his license on March 13, 2007, following a hearing a month earlier.The board found “numerous instances of unprofessional conduct,” citing more than a dozen violations of statutes and rules, which included accepting fees in return for preparing appraisals to match predetermined values of properties, omitting from appraisals aspects of properties that would diminish their value and providing false and misleading information on appraisals.Ruling that Korkosz “demonstrated a total lack of integrity,” the board concluded that his “actions were based not on a misunderstanding of the requirements of his profession but rather on personal greed.”Carol Leighton of the Maine Real Estate Appraiser Board said that it not only revoked Korkosz’s license but also revoked or suspended the licenses of numerous apprentices associated with him.Leighton said that the Maine board informed its counterparts in both Vermont and New Hampshire, where Korkosz was also licensed, and posted its order on its website as well as on the national registry maintained by the Appraisal Foundation, established in 1987 and incorporated in federal law in 1989 after the savings and loan debacle of the ‘80s.In Vermont, the Board of Real Estate Appraisers began revocation proceedings against Korkosz in May 2007 on the strength of the decision of Maine regulators to revoke his license.After Korkosz failed to answer the charges, Vermont officials revoked his license in July 2007 and, like Maine, informed the New Hampshire Real Estate Appraiser Board and posted the order on the national registry.Hibbard of the New Hampshire board said, “I don’t really recall being informed he had been revoked in Maine and Vermont. We do get revocations they issue, but I can’t say we’ve received every revocation they’ve ever done.”Hibbard said that at the time the board was unable to access the national registry. “We didn’t have a password code,” she said. “We did what we could with what we had at the time.” Hibbard said that the board has since gained access to the registry.Not until December 2008 – 18 months after Maine revoked Korkosz’s license – did the New Hampshire board take action. Hibbard recalled that when Korkosz applied to renew his license he disclosed that his license had been revoked in Maine and Vermont. She explained that the board is authorized to order a hearing and revoke a license solely on the grounds that another state has done so, and in response to the disclosure revoked Korkosz’s license in February 2009, eight months before FRM collapsed in November.Hibbard said that the board does not inform other state agencies when it disciplines appraisers or revokes their licenses.‘Something not right’In September 2009, just weeks before FRM shut down, state officials first grew suspicious of the relationship between FRM and Korkosz. Senior Assistant Attorney General Peter Roth was representing the Department of Environmental Services in a claim against Kevin Guay, a Concord developer, for alleged wetlands violations at a project on Clinton Street.A year earlier, Guay filed bankruptcy, but by 2009 was seeking to borrow $400,000 from FRM as part of a plan to restructure $5.4 million in debt secured by the Clinton Street property. DES, through Roth, opposed the borrowing, fearing the additional debt would hinder Guay from paying his fine.Roth concluded that, at $2 million, the value of Guay’s property, which was assessed at $463,000, was highly inflated. And he learned that the appraiser, Philip Korkosz of Hooksett, who valued property for FRM, had lost his license in Maine, Vermont and New Hampshire.Roth e-mailed Bob Fleury, deputy bank commissioner, writing, “there’s something not right about this.”Fleury forwarded the e-mail to Mary Jurta, head of the department’s consumer credit division, which licensed and examined FRM and recommended enlisting the Attorney General’s Office, Bureau of Securities Regulation, and Real Estate Appraiser Board in a joint investigation. But no action was taken.Meanwhile, following the collapse of FRM, Korkosz applied to the New Hampshire Insurance Department for a license to sell life, accident and health insurance. Asked if he had ever been subject to proceedings regarding any professional or occupational license, he disclosed that his appraiser’s license had been revoked in three states. After his application was denied, Korkosz appealed.Drawing on the original decision of the Maine Real Estate Appraiser Board, his appeal was rejected.”There is really very little difference in the requirements for appraisal and insurance licensure in that both require, among other things, honesty, competency and trustworthiness,” the order read.Michael Kitch is a reporter for the Laconia Daily Sun, where this article originally appeared.