Lenders cry foul over firm

Scandal-tainted N.H. mortgage co. gets to keep Mass. license

A scandal-tainted home-loan firm that's using Red Sox knuckleballer Tim Wakefield as a pitchman should be thrown out of the mortgage game, some Bay State lenders say.

Home-loan executives are blasting regulators' decision to let Plaistow, N.H.-based The Mortgage Specialists Inc. stay in business despite allegedly forging client signatures and dumping incriminating records.

Massachusetts and New Hampshire regulators OK'd a settlement under which Mortgage Specialists will keep licenses in both states but pay $725,000 in fines.

The firm - which admitted no wrongdoing - will also hire outside auditors to review records back to 2005, as well as going forward for up to three years.

The deal comes after state inspectors allegedly found Mortgage Specialists had cut-and-pasted customer signatures onto some documents instead of getting real sign-offs.

In one case, a client who applied for a 30-year mortgage allegedly wound up with a much-more-costly 40-year loan - apparently without the person's knowledge.

Another loan application reputedly inflated a woman's 2005 income to $99,000, even though she made just $17,700 as of 2007, according to court filings.

Inspectors allegedly found many suspect documents in a shredding bin after Mortgage Specialists took four hours to produce files stored just 10 minutes away.

Such supposed misdeeds have local lenders fuming.

"A number of people - myself included - think (the settlement) sends the wrong message: That if you can afford the fines, you can stay in business (without playing by) the rules," said Charles Nilsen, chairman-elect of the Massachusetts Mortgage Bankers Association.

He and others say they've heard dozens of lenders and brokers criticize the deal in recent days.

But regulators defend the pact.

David Cotney of the state Division of Banks said officials cut the deal because "we did not find that (Mortgage Specialists' owners) or anyone still with the company engaged in any fraud."

David Zak, a Needham lawyer who brokered the Bay State part of the pact for Mortgage Specialists, dismissed critics as "disgruntled competitors."

"It's a harsh, expensive settlement (that) establishes clear procedures to ensure compliance going forward," Zak said, claiming that "no consumers were ever hurt - either before, during or after (the alleged misdeeds)."

Mortgage Specialists has local offices in Peabody and Worcester, using Wakefield as a radio pitchman.

Wakefield said he's aware of the firm's problems and isn't sure he'll continue as company ad man. "It's under review," the pitcher said.

Mortgage Specialists President Michael Gill has a controversial history.

Outside of the loan business, Gill is one of thoroughbred racing's most successful horse owners, winning millions of dollars in purses. He's even netted an Eclipse Award, the industry's top honor for owners.

However, tracks in New York, Delaware and elsewhere have partly or fully banned Gill's horses over the years amid speculation that his animals received performance-enhancing drugs.

Gill has denied such charges, but one of his horses did test positive for the substance benzylpiperazine at Boston's Suffolk Downs in 2001.

Six years earlier, New Hampshire racing officials banned Gill for three years after a horse he trained came up positive for the drug clenbuterol.

Jeff Horrigan contributed to this report.