Connecticut Mortgage Exec Sued Over Subprime Mishaps
The State of Connecticut is seeking the arrest of former Mortgage Lenders Network USA President Mitchell Heffernan for failing to pay employees as the subprime mortgage lender sank into bankruptcy.
Any charges would be the first against a former top executive of a large U.S. home mortgage lender since delinquencies and defaults began rising in recent months.
The Connecticut Department of Labor applied for an arrest warrant charging the home loan lender CEO with failing to pay $3 million to 61 employees of Mortgage Lenders, department spokeswoman Nancy Steffens said.
Most of the amounts owed relate to sales commissions, ranging from $5,000 to $300,000 per person, she said.
“The [home mortgage company] declared bankruptcy, requiring us to go through a criminal court to get former employees their money,” Steffens said.
“Our real purpose is to get people money owed to them. If we can work out a settlement without criminal charges, that’s great.”
Calls and e-mails to Mortgage Lenders were not immediately returned, and Heffernan could also not immediately be reached. Mark Miele, an inspector in the office of State’s Attorney Timothy Liston, who works in Middletown, Conn., declined to comment.
Mortgage Lenders had employed 1,800 people nationally, including 950 in the state of Connecticut, before filing for Chapter 11 bankruptcy protection from creditors on February 5.
The company had been the 15th-largest U.S. mortgage lender to people with poor credit histories. It expects to liquidate this year.
More than two dozen providers of subprime [bad credit home loans] have quit the industry altogether in the last year alone, and at least four large lenders have sought bankruptcy protection.
In addition to this troubled Connecticut mortgage lender, another lender (New Century Financial), faces investigation by federal prosecutors in regards to its accounting as well as trading in its stock.
New Century had been the largest independent subprime lending institution before shutting down its loan operations this month.
SOURCE: CNN Money