Walther named acting commissioner for new Mortgage Lending Division

Monday, Aug. 4, 2003 | 11:04 a.m.

CARSON CITY -- With recurring problems in the mortgage investment and lending business, the Legislature created a new division to give closer supervision to the industry.

Sydney Wickliffe, director of the state Department of Business and Industry, Friday named her deputy director Doug Walther as acting commissioner for the new Mortgage Lending Division.

Walther said Friday the major problem has been the growth in Southern Nevada. "There are a lot of people moving into Las Vegas. There are a lot of people borrowing money and there are a lot of people lending money."

Assemblyman David Goldwater, D-Las Vegas, was the author of the 2003 law to establish a new division. The state Division of Financial Institutions had regulatory power over escrow agencies and agents and mortgage brokers.

The new division will oversee these companies and individuals and will also supervise mortgage companies.

Goldwater said the Legislature has been tightening the laws over the industry over the past few years. "But the agency (Financial Institutions) wasn't as accountable as we wanted them to be."

"The industry has grown and it needs attention," said Goldwater, citing the 1998 seizure by the state of the now defunct Harley L. Harmon Mortgage Company and the insolvency of Interstate Mortgage, both in Las Vegas, in which investors lost money.

Goldwater also referred to a dispute between Vestin Mortgage and developer Howard Bulloch.

In April, a Clark County District Court judge sharply criticized the FID for its failure to act on complaints against Vestin by Bulloch.

Bulloch filed a complaint against the FID for its failure to act on the alleged mishandling of two loans he received from Vestin. District Court Judge Sally Loehrer ordered a new investigation, and three possible violations were found.

Vestin has denied wrongdoing in the Bulloch court case. In March, Bulloch won a $5 million judgement against Vestin in U.S. District Court. The company plans to appeal.

In a separate FID complaint against Vestin over the Bulloch allegations, a June 16 hearing was delayed, and a new date has not been set. Again, in the FID case Vestin has denied wrongdoing.

The state was ordered to pay Bulloch $187,000 in attorney's fees for the complaint brought against the FID.

Goldwater said the mortgage lending and mortgage investment business cannot be second or third on the list of things to do by the Financial Institutions Division.

Walther has scheduled two public workshops to discuss regulations for the new division. The first will be Sept. 4 (9 a.m.) at the Grant Sawyer State Office Building in Las Vegas and Sept. 9 at the hearing room of the state Department of Business and Industry in Carson City.

Goldwater said he originally proposed setting up a commission to oversee the industry. But after talking with Gov. Kenny Guinn, they decided that a full-time independent agency was needed.

Assembly Bill 490 became law without the governor's signature. Michael Hillerby, assistant chief of staff for Guinn, said the governor objected to the way an amendment adding mortgage bankers to the bill was added on the final night of the Legislature. Hillerby said the amendment in question was defeated 6-0 in the Senate Commerce and Labor Committee. But it was offered on the floor by Sen. Randolph Townsend, R-Reno, who is chairman of the committee, and it passed the floor.

Hillerby said the governor feels there is no reason to regulate mortgage bankers because they are controlled by the federal government. He said not signing the bill had nothing to do with the governor's son being in the mortgage business. "But he is always sensitive to that issue and holds himself to a higher standard," said Hillerby.

Wickliffe, whose department will oversee the new division, said Walther will serve until a permanent director is appointed, hopefully in October. The job pays $80,000. Wickliffe said the main office would be located in Las Vegas with another in Carson City.

She has also started staffing the new office, mainly from personnel from the Financial Institutions Division who are responsible for the mortgage and escrow activities.

Walther said there initially would be a staff of 13. He said there would be a contract with the state Gaming Control Board to do background investigations on those who want to be licensed in the industry.

Wickliffe said, "We are starting lean, but with an experienced pool of examiners, accountants and support staff, which takes a great deal of pressure off the transition.

She said she may have to ask the Legislative Interim Finance Committee for more staff if the need arises. The agency is supported by fees collected from those who are regulated.

Walther is a former senior deputy attorney general who represented the Financial Institutions Division from 1990 to 2000. He was then named deputy director.

Wickliffe said the determining factors in naming Walther as acting director were his knowledge of the mortgage licensing and regulatory activities and his hands-on experience with the industry.

Wickliffe is also searching for a new director for the Financial Institutions Division. Scott Walshaw, who held the job for more than 20 years, has resigned. Walshaw announced his resignation July 25 -- but Walshaw and state officials wouldn't comment on the reasons behind his departure.

Walshaw, who held the post for 20 years, is expected to continue working through the Oct. 15 effective date of his resignation.