Banking board adds workers to target fraud

The N.C. Commissioner of Banks has doubled its investigative staff to rout out fraud in the home-lending industry.

In the past year, the commission has gone from two full-time investigators to five. And it has added three examiners who routinely visit mortgage offices to go through files.

"The state has been very aggressive," deputy banking commissioner Mark Pearce says on today's "Headline Saturday," a TV program produced by The News & Observer and WRAL. The show was taped Friday morning and airs tonight at 7.

"It's an issue we have been working on and need to do a lot more on," Pearce says.

The mortgage market has come under scrutiny since fallout in the subprime industry caused shock waves in financial markets. Some lenders made loans without considering borrowers' ability to repay -- in some cases overstating buyers' income by as much as 50 percent.

The system eventually collapsed as mortgages with teaser interest rates or other introductory terms adjusted higher, as much as doubling homeowners' monthly payments. Foreclosures have skyrocketed across the country.

North Carolina lawmakers this year passed the most sweeping changes to state mortgage laws in eight years, strengthening lending requirements to reduce problems. Gov. Mike Easley signed several provisions into law Thursday, mandating, for instance, that lenders make sure that borrowers can afford their loans.

The banking commission pushed for another law, signed in July, that makes mortgage fraud a felony. And it has punished brokers and loan officers who engaged in wrongful practices, including revoking the license of a Matthews broker this month.

Pearce stopped short of saying whether the commission is investigating Beazer Homes, which is the subject of probes by the Federal Bureau of Investigation, U.S. Attorney's Office in Charlotte, the Internal Revenue Service and Securities and Exchange Commission.

Beazer, one of the largest builders in the Triangle, came under review after The Charlotte Observer this year reported problems with the Atlanta-based home builder's mortgage origination services, including possible fraud.

North Carolina has fared better than many other parts of the country amid the turmoil in the home-lending market. Foreclosure filings rose 39 percent in the first half of the year compared with the same period in 2006, according to data from researcher RealtyTrac. Nationally, filings increased 56 percent.

The Triangle has seen an even smaller effect. The number of foreclosures in the region overall increased 4 percent, RealtyTrac figures show.

"We still have one of the strongest housing markets in the country," Mike Walden, an economist at N.C. State University, says on "Headline Saturday." "We're a magnet for job creation, and we didn't have the run-up" in home values that other places recorded, gains that contributed to housing woes.

Even so, some people in this market who want to buy homes will suffer because of the problems in the broader housing market. Those with poor credit will have trouble getting loans, Pearce says, and those looking to buy houses likely will pay higher interest rates.

He predicts that statewide, the the mortgage mess could continue for another year, with foreclosure filings rising for 12 months.

In addition to Pearce and Walden, "Headline Saturday" features Hal Eddins, a vice president at Capital Investment in Raleigh, who discusses the housing market, the broader economy and the ups and downs on Wall Street.