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Mortgage files are seized by deputies
By BILL COATS
© St. Petersburg Times, TAMPA -- The problems plaguing GreatStone Mortgage Co. compounded this week when Hillsborough County sheriff's deputies arrived in an apparent effort to seize as many as 171 mortgage files. The files, representing nearly $15-million in loans, were demanded by Bear Stearns Mortgage Capital Corp., in a business deal that was derailed by GreatStone's problems with federal regulators. The Tampa company has been an aggressive telemarketer of mortgage refinancings, often targeting financially pressed homeowners. Attorneys for Bear Stearns declined to comment Thursday. No GreatStone executives or attorneys returned telephone calls. A woman who met a Times reporter in Great-Stone's foyer said "a problem with an employee" had drawn deputies there. The woman would not identify herself. A lawsuit, filed Friday by Bear Stearns, said the two companies agreed in March that Bear Stearns would buy mortgages originated by GreatStone and sell them back to GreatStone later. Mortgages commonly are bought and sold in bundles as investment securities. The agreement required that GreatStone be approved as a mortgage issuer by the Government National Mortgage Association, or "Ginnie Mae," a federal corporation that promotes affordable housing by making mortgages attractive to the investment industry. But this summer, federal regulators stripped GreatStone of its Ginnie Mae status. The fast-growing company was placed on probation, stripping its authority to underwrite government-backed loans. They criticized GreatStone for marketing refinanced mortgages to homebuyers who weren't credit-worthy, leading to a default rate nearly twice the national average. The change caused a sequence of defaults in the Bear Stearns agreement. On Aug. 6, Bear Stearns terminated GreatStone's right to service the loans. Then, in Friday's suit in Hillsborough County Circuit Court, Bear Stearns claimed ownership of the files, listing 171 mortgages. Sheriff's deputies were seen going in and out of Great-Stone's headquarters Thursday, and a sheriff's corporal huddled outside with Bear Stearns' local attorneys. One industry expert said a move to seize mortgage files was rare in the careful community of mortgage lenders. "It's unusual for someone to take that sort of action that quickly, that emphatically," said Karen Gowins, senior vice president in mortgage banking for Birmingham-based AmSouth Bank. GreatStone, run by boyhood friends now in their 30s, has an unusual history. President Corey Brower and chief operating officer Steven Cohn moved their company to Tampa from New Jersey five years ago. GreatStone executives and their families began buying houses in a small Carrollwood neighborhood called the Hamlet. Brower eventually told neighbors he hopes to convert the neighborhood to an exclusive, gated community. Their company, meanwhile, mushroomed. As of June, the six-year-old company had 600 employees, writing $876-million a year in mortgages. Then Brower indicated a month ago that 147 employees were being laid off "as a result of unforeseeable business circumstances." He said the layoffs were expected to be temporary. -- Bill Coats can be reached at (813) 226-3469 or coats@sptimes.com.
 © 2006 • All Rights Reserved • St. Petersburg Times
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From the Times Business report
From the AP
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