I knew that sooner or later the First Magnus debacle was caused not only by questionable lending pratices but also on other, less obvious, means.  After nearly a year since their collapse we find out that First Magnus violated Real Estate Settlement Procedures Act (RESPA) by paying mortgage brokers incentives to assist them with originating FHA loans.

For those of you who aren’t part of the real estate industry, what they did was blatantly ILLEGAL!

The Arizona Daily Star just published this article regarding First Magnus and they will be publishing an expanded article in tomorrow’s paper. A quick excerpt:

HUD found that First Magnus paid $58,571 in incentives from Jan. 1, 2003 to Dec. 31, 2005 to seven brokers for the origination of 169 FHA-insured mortgages totaling more than $24 million, according to the report.

Tomorrow’s edition should detail these illegal activites and hopefully pinpoint these crooked mortgage brokers. And all this while First Magnus has re-opened shop as Stonewater Mortgage Corp.

Kind of makes you sick, doesn’t it?

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