A woman who recently pleaded guilty to bank fraud has been working for a Myrtle Beach mortgage broker, illustrating the difficulty experts say they have in regulating the state's home loan industry.
Oragail "Gail" Crowder pleaded guilty in federal court in July to bank fraud related to an automobile dealership she and her husband, Ronald, operated in Florence.
The S.C. Department of Consumer Affairs, which regulates mortgage brokers, can fine a broker up to $5,000 and revoke the broker's license for such violations. In addition, those who violate the state's mortgage broker laws are guilty of a misdemeanor punishable by a maximum jail sentence of six months.
Charles Knight, a lawyer with the state's Department of Consumer Affairs, said policing the mortgage broker industry "definitely has been a challenge."
The department has seven investigators who oversee 823 mortgage broker offices and thousands of other businesses, including pawn shops, fitness clubs and retirement communities.
William Day, the U.S. attorney who prosecuted the Crowders, said Gail Crowder's job with a mortgage broker was discussed during court hearings in March.
Pat Culbertson, chief probation officer for the U.S. Probation Office in Columbia, said his office can only inform employers of a worker's conviction. It is up to the employer, Culbertson said, to take action.
"If we determine that someone poses a risk, the only thing the probation office is authorized to do is inform the employer that they are responsible for that risk," Culbertson said.
JoLee Gudmundson, executive director of the S.C. Mortgage Brokers Association, said consumers should ask to see brokers' licenses before doing business with them.
Members of Gudmundson's association make up an advisory group that reports on industry problems to the state's Department of Consumer Affairs.
He said more money for additional investigators also would help cut fraud in the mortgage lending industry, which is largely unregulated in South Carolina.
Gail Crowder was sentenced in March to 37 months in prison and Ronald Crowder was sentenced to 46 months in prison for the bank fraud, which cost loan companies and customers $1.5 million, according to U.S. Attorney Reginald Lloyd.
The Crowders have been free on bail since shortly after their indictment in August 2005 on 61 counts of bank fraud. They have not started serving their sentences because the U.S. Bureau of Prisons hasn't determined where the Crowders should be incarcerated.
The Crowders used a line of credit from Carolina Bank & Trust to buy used cars for their Crowder Cars Inc. dealership, according to court documents. The Crowders were supposed to pay off the loans when the cars were sold but instead kept the money, court records show.
The Crowders also failed to pay off outstanding loans for trade-ins, as they were supposed to, leaving customers to pay for automobiles they no longer owned.
The Crowders could have received prison sentences of up to 30 years each, but their sentences were reduced in part because they promised to pay $900,000 in restitution.
Ronald Crowder has a fatal illness, according to court documents, and Gail Crowder told the court she would use her husband's $617,000 in life insurance benefits to repay fraud victims after her husband dies. The court documents do not say what type of illness Ronald Crowder has.
An ongoing investigation by The Sun News has shown a pattern of abusive and fraudulent practices in the mortgage industry, especially among mortgage brokers, appraisers and manufactured home sellers.
The newspaper's investigation has prompted state regulators to permanently revoke the sales licenses for five Horry County home sellers accused of fraud.
A report by the state's Department of Consumer Affairs calls mortgage fraud "one of the fastest growing crimes in the United States," with 80 mortgage fraud convictions in South Carolina over the past three years. Those prosecuted include mortgage brokers, loan officers, developers, appraisers, real estate agents and lawyers.
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