A small number of mortgage brokers account for a large number of Federal Housing Administration loan foreclosures in Colorado.
Statewide, the FHA reports 337 claims against its insurance fund on Colorado home loans issued in the past two years. One-fourth were originated by just four small Denver-area firms: Primero LLC, Alliance Mortgage Capital Inc., International Lending Solutions Inc. and Creative Mortgage Inc.
All passed what federal officials call a rigorous application process for the right to originate federally insured loans.
Because of their extraordinary default rates, the Denver FHA field office terminated Creative Mortgage and International Lending Solutions just before both companies dissolved this year. It terminated Alliance Mortgage Capital two months before that company dissolved last year.
Primero's owner, Michael Richardson, said his business was effectively closed by December 2004 - six months before the Denver field office terminated its right to approve FHA loans.
"My company got infiltrated by a mortgage-fraud ring," he said. "In about seven months, they did enough damage to me to put me out of business."
Richardson said he fired five employees in one day after discovering they had been recruited by a man who supplied false loan-application information - Social Security numbers, driver's licenses, pay stubs - to qualify buyers for homes.
"Anything that particular borrower was missing, they'd fix it," he said.
Richardson, who had been in the mortgage business for 26 years, wrote a book on mortgage fraud, "An American Epidemic," and is trying to launch a new career as a fraud-prevention expert.
He said the people who ruined Primero and put many buyers in homes they could not afford have not yet been charged with any crime.
"I'm out of business. Two-and-a-half years later, they're still committing fraud every day," he said.
The FHA is an agency of the U.S. Department of Housing and Urban Development, which has a website that tracks the performance of federally insured loans. That website, Neighborhood Watch, shows Primero loans are defaulting more than seven times as often as other FHA loans in Colorado.
Alliance Mortgage Capital loans are defaulting at 654 percent of the state average, International Lending Solutions loans at 577 percent and Creative Mortgage Loans at 431 percent. The owners of Alliance, International Lending and Creative Mortgage could not be reached for comment.
Forty-one percent of Primero's FHA loans defaulted - or at least three months overdue - within the first year.
HUD officials say they review loan originators' default rates every three months, and their response to mortgage brokers with bad track records has been timely.
"Our view is HUD has handled the situation properly," said John Carson, HUD's regional director in Denver.
FHA loans originated by an Aurora mortgage broker, Applewood Finance Corp., have defaulted at 304 percent of the state average. Its owner, Howard Hill, said he voluntarily gave up his FHA privileges this year. He blames the borrowers, not the loans.
HUD's Carson said the agency systematically evaluates risk "on a per-lender basis. We look at the foreclosure and default rate by lender. We rely upon lenders to evaluate risk based on actual data such as credit scores."
Computer-assisted reporting editor Jeffrey A. Roberts contributed to this report.