Friday, March 18, 2011

Loan Fraud Frustrates Pastor's Vision

On Wednesday, March 16, the local sheriff's office in Richmond, CA, was tasked to enforce a forclosure notice against Bibleway Apostolic Church. On the surface, it appeared that the church was another victim of the mortgage squeeze, unable to make its payments due ot the economic downturn's impact upon its members. Pastor Sidney Keys, however, supported by his wife and members of the congregation and community, argued that a more sinister cause, loan fraud, lay behind the church's woes.

In January, 2010, Torrey Pines Bank notified the church that the monthly payments for a recently approved commercial loan would be $6000 per month. The pastor protested, saying that he had been told by the bank's predecessor, Alta Alliance Bank, that the payments would be in the range of $4000 per month. Keys further informed the bank that there was no way the church could afford such a payment, saying that the church's financial statements clearly supported a loan payment closer to $4000 than $6000. According to Keys, then-bank president Arnold Grisham told him that the bank needed to see the church's financial statements, saying that "there was a problem with the papers" that the bank had in the file. The original loan was brokered by Jet Stream Mortgage, which, according to public records from the California Department of Real Estate, went out of business in 2007. Keys states that there were also discrepancies in the property appraisal, documents contained forged signatures, and false financial statements were created.

Pastor Keys turned his information, which included documents given to him by a former bank employee, to the offices of Richmond Mayor Gayle McLaughlin and State Senator George Miller, who each tried, unsuccessfully, to intercede with the bank. Eventually, Keys contacted the District Attorney's office, which is investigating and expects to make a determination within 30 days regarding possible indictments. The evidence provided by Pastor Keys could lead to arrests, but by that time, the damage could already be done. The church property was sold at auction on November 18, 2010, to "Macdonald & 2nd LLC." The chief official of that company, Ronald Haskins, is also Senior Vice President, Commercial Credit Management, for Torrey Pines Bank.

Both Keys and Torrey Pines Bank agree that efforts to resolve the dispute have thus far been unsuccessful. Bank Spokesperson Krystal Watkins replied by email, stating that "Torrey Pines Bank (formerly, Alta Alliance Bank) has worked with the Bibleway Apostolic Church for over a year to resolve this unfortunate situation, going well beyond our typical collections protocol.

The Bank understands and regrets the disappointment of those who have been affected by this situation. However, any suggestion that the Bank acted improperly or illegally in any way is simply untrue. The Church and Pastor Keys have had multiple opportunities to substantiate their claims in appropriate legal proceedings over the past many months. The bank is not aware of any pending investigation and no other legal claims have been filed with any court."

Commenting on the broader aspects of this case, Pastor Chris Deknatel of Promise Lutheran Church of Murrieta, noted that Lutheran churches are able to seek funding for ministry projects from the Lutheran Church Extension Fund. A nonprofit entity of the Lutheran Church Missouri Synod, the Fund operates with rigorous checks and balances from the Synod, but also has no incentive to fraud, since it does not operate from a profit motive. Commercial banks, by contrast, must keep as a bottom line motivation, high rates of return on investment. In addition, the fact that many loan officers work for 100% comission wages, creates a strong pressure to make loans that are based upon shakey or even false information. Commenting from a commercial lending perspective, Mike Brewer, of Griffin Capital Funds, a company that has had several years of experience in the church financial market, stated that many of these issues should have been caught by the loan underwriters for the original lender. companies like Griffin, which does work with mortgage brokers, takes a dim view of brokers who try to sneak loan through. "A lender will stop working with brokers until investigations are finished, and may rely more on its own in-house loan offficers," he said via a telephone interview.

As of March 18, the congregation was still on the property, and an ex parte hearing had been requested seeking an injunction.
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