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Updated Jun 18, 2012 - 6:38 am

Mortgage broker accused of down-payment scheme

PHOENIX -- A class-action lawsuit has been filed charging that mortgage broker The Lending Company illegally offered a popular 1 percent down payment on FHA loans. The lead plaintiff in the case claims that federal law requires a 3.5 percent down payment on FHA loans.

"FHA is generous in that they allow you to increase the interest rate to a point to pay for all of your closing costs," said Valley real estate expert Dean Wegner. "The Lending Company took that to the next level. They increased the rate so high that it could cover the down payment."

Wegner said the company then took it another step further by paying charities a kickback and and an 'administrative fee' (usually about $400) from the money earned from the higher interest rate, and the charities then "gifted" the borrower the money for the down payment.

"TLC had basically the buyer, through the higher interest rate, fund the down payment through the charity, and the charity paid the buyer," said Wegner.

Wegner said the kickback and administrative fee amounted to hidden closing costs that TLC didn't tell the borrower about. He said that it remains to be seen whether any charities will be accused of wrongdoing.

Wells Fargo Funding and RJ Reynolds are among those also named as defendants in the lawsuit.

About the Author


Years with the company: I started on January 2, 2006.

Education: I was born in San Antonio, Texas, but we moved to Phoenix when I was one-year-old in 1957. I grew up here and graduated from Alhambra High School and attended Phoenix College.

Family: I live in north Phoenix with my wife Rene' and my son Devin.

Favorite food: Lots of favorite food, but our favorite restaurant is Fajitas.

Favorite spot in Arizona: The Little America Hotel in Flagstaff.

Favorite news memory: We have to go back to October 15, 1979. I was a country music air personality at KROP Radio in Brawley, California, when we had a 6.7 earthquake. Thankfully, there were no deaths and only minor injuries, but the entire community was pretty freaked out and listening to the station on their transistor radios. I would not want to go through an earthquake again, but it sure was a great night to work in radio and see how it can make a difference in people's lives.

First job: Working as a stringer for 'The Arizona Republic' at high school football games. My first real job was flipping burgers at the old Sandy's Hamburgers at 51st Avenue and Indian School Road. My first radio job was as announcer at KALJ radio in Yuma in 1977.

First concert: My Dad took me to see Jimmy Dean at the Arizona State Fairgrounds in the 1960's. It was before the Coliseum was built. The only thing I remember is Jimmy Dean singing his big hit "Big Bad John."

Favorite sports team: Phoenix Roadrunners minor league hockey. My dad took me to a game when I was in grade school, and I was hooked. I wanted to be a radio hockey play-by-play man. I used to take my cassette recorder and sit up in the rafters of the Coliseum and do play-by-play. It was great later in life to also take my son to Roadrunners games. Too bad the team just folded, I'll miss them. (Going to the Coyotes is fun, but they're not "my" team.)

Outside interests: My family and I are active in our church - Shiloh Community Church in Phoenix. Devin is a high school student at Scottsdale Christian Academy. He plays on the baseball, football, and basketball teams and sings in the choir. Obviously, we keep busy trying to go to all his events! We enjoy going to movies, sporting events, and long road trips. We like to vacation at the Beach Cottages in the Pacific Beach area of San Diego. And I love to play catch, basketball, football with my son.

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