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Mortgage company an enigma to HUD, neighbors
By TIM GRANT © St. Petersburg Times, published May 27, 2001 TAMPA -- Almost overnight, a fleet of luxury cars appeared in the Hamlet. Suddenly, the quiet Carrollwood subdivision was teeming with Mercedes, Porsches, Jaguars and BMWs. "I'd walk by their driveways and see a couple hundred thousand dollars' worth of cars outside the homes," said Steve McInturff, a resident. "And all the cars were black." The people driving the black cars bought up more and more of the homes in the suburban neighborhood, then expanded some of them to more than twice their original size. Now they've proposed turning the Hamlet into a gated community with a high wall and a guarded entrance. The residents of the Hamlet are still trying to figure what to make of their unconventional new neighbors. So are federal authorities and business partners. The people in the black cars are top executives of GreatStone Mortgage and their family members. The privately held Tampa corporation is led by two men who have been friends since childhood and by a close-knit team of executives who share a penchant for privacy. But their home-buying spree has brought unwanted attention. And the way they run their business has prompted federal inquiries. The Department of Housing and Urban Development confirms that it is looking into the lending practices of the fast-growing company that uses telephone marketing to pitch new mortgages to homeowners across the country. In response to a request by the St. Petersburg Times, HUD's regional office in Atlanta released reports that found dozens of improper loan charges and questionable practices by GreatStone. The company specializes in government-backed mortgages, such as HUD, VA and FHA loans. One HUD review said mortgage points charged by GreatStone in several cases "are clearly excessive and an indication of predatory lending practices. The Department considers this to be a potentially serious violation . . . " And two major title companies said they have stopped handling mortgages from GreatStone because the company was late in delivering funds. GreatStone's executives did not respond to repeated requests for comment. Corey Brower and Steven Cohn have been friends since they were kids in New York City. In 1994, they founded a mortgage company called Foundation Funding in New Jersey. Florida provided the company's biggest pool of funds, according to company documents, and Brower and Cohn moved their headquarters to Tampa in August 1996. With the help of a Tampa ad agency, they decided to rename their company GreatStone. Brower is the president and chief executive. Cohn is chief operating officer. Both are 32. According to licensing documents filed with New York state in 1998, each owned half of the company. In that year, they projected net income of $6-million. On a company Web site, GreatStone promises to provide "a level of excellence and customer satisfaction never before accomplished in an often frustrating and confusing industry." It boasts of offices in more than 40 cities nationwide. Beyond that, the company's top executives remain secretive. In a brief interview in January, Brian Stulman, 33, a senior corporate manager for GreatStone Mortgage, said the company has about 800 employees nationwide. Stulman, who is Brower's brother-in law, said he did not wish to be photographed because many of those employees do not know what he looks like. He did not explain why it was important to maintain that anonymity. But the off-duty pursuits of some of the company's leaders and their families have brought them unaccustomed attention. It started last year when CEO Brower and his wife, Sandi, chopped down a grandfather oak tree to make room for an addition to a home in Sandi Brower's name in the Hamlet. Although the Browers were fined $1,350 for improperly removing the tree, the county issued a building permit for their home expansion. Records show Brower bought his first home in the subdivision in 1996. Now a dozen or more of the 70 homes are owned by GreatStone executives and family members. According to residents who attended an annual homeowners meeting in March, Brower told his Hamlet neighbors that he wants to turn it into a GreatStone family and corporate retreat with a 24-hour guarded entrance. This year, Stulman bought and shut down Hard Bodies, a busy and controversial strip club at Nebraska and Bearss avenues in Tampa. A bar named J.B. Jordan's opened in a building he bought next door. Like much that involves GreatStone executives, it is a family affair. J.B. Jordan's is owned by Junior Webb, a friend of Stulman's brother, Lee. Its name was inspired by 10-month-old Jordan Brower, a niece of Stulman's sister, Sandi Brower, wife of GreatStone's CEO. For a time, Corey Brower displayed his collection of antique cars in front of the bar. Now the cars sit in the front yard of a home he is renovating in the Hamlet. GreatStone's headquarters are at Waters Avenue and Dale Mabry Highway in Tampa. A reporter was not permitted a tour, but several former employees describe a high-pressure sales operation and a clannish leadership. Lisa Lynch, a former manager at GreatStone's headquarters, said she was one of six people in an elite group called the General Manager's Advisory Committee, informally known as the "Skulls." "I was invited to join because of my high product numbers and loyalty," Lynch said. "We got special perks and benefits. We got leads that were the direct product of marketing and call-ins. "We didn't attend the general meeting with the 12 other managers. We met separately with the highest level executives. All six of us had skull flags hung from our desk. They were meant to distinguish us from the rest." Lynch said she was fired in April for "lack of productivity," a contention she denies. David Jones, a former manager who was fired in early May, said supervisors accused him of having a conflict of interest but did not explain what that was. Jones said when he left, GreatStone was writing about $100-million a month in mortgages. He said loans that GreatStone officers are encouraged to write often are risky. Jones said the telemarketers who serve as loan officers often have no experience in the mortgage industry and are trained to practice hard-sell techniques. "One of the things they tell us is to rent the movie Boiler Room," Jones said. "They classify it as a motivational movie." Jones said GreatStone customers often are behind in their mortgage payments and have questionable credit. Those customers are charged up to eight points for a mortgage, Jones said, compared with a more typical one or two points. Each point is 1 percent of the loan amount. Now there are indications that GreatStone's fast growth and hard-charging approach are creating problems with those who handle its mortgages. Lawyers for Stewart Title and Chicago Title Insurance Co. confirmed that they stopped accepting business from GreatStone. According to Tom Kennedy at Stewart Title, GreatStone's troubles began about mid-February. He said at least 20 mortgages that GreatStone wrote nationwide were not funded until weeks after the closing. "They were all refinances," Kennedy said. "What I was told by GreatStone is that the customers were not held responsible." Kennedy said Cohn, GreatStone's chief operating officer, told him the company was "busier than expected and made more loans than they could handle, and now they are scrambling to find funding for those mortgages they've made." Paul Peterson, general counsel for Chicago Title, said the company stopped doing business with GreatStone, at least for the time being, for the same reason. "The status of our relationship is currently under review," Peterson said. "GreatStone is one of those marvelous mortgage companies that essentially had so much business in a short period of time because of the refinance boom that they ran through their available line of credit and had to look for new lines." Kathy Buchanan, a spokeswoman for the Mortgage Bankers Association of America, said she is puzzled by GreatStone's funding predicament. "It's unusual for a mortgage banker to run through their line of credit," she said. "A lot of mortgages are being made and sold into the secondary market." A mortgage banker such as GreatStone typically draws down its line of credit when it makes a loan but replenishes it by selling the loan into the secondary market. Roberta Probber, a bank and thrift analyst at Ryan, Beck & Co. in New Jersey, said, "Any mortgage banker that has lost its funding source, lost business with title insurance companies and has originated loans they can't sell is obviously under a lot of pressure." "I'm not familiar with GreatStone, but given these facts, I'd say they are in a fair amount of trouble if they've originated loans they cannot sell," Probber said. "For some reason, the market doesn't want to buy these loans." Whatever GreatStone's financial situation, its top executives have not slowed their home buying in the Hamlet. Early this month, Brower purchased the home of Hillsborough County Circuit Judge Richard Nielsen, who lives in the Hamlet. Nielsen's wife, Linda, said they were pleased with the deal but would not discuss details. "I found them to be extremely gracious. I don't have any complaints with what they are doing," Mrs. Nielsen said. "I think it's going to be a beautiful neighborhood when it's all complete." Tampa lawyer Donald Conwell was once Brower's chief critic in the Hamlet. Conwell, whose home backs up to one Brower is remodeling, lodged an environmental complaint after Brower and his wife chopped down the oak tree that had shaded Conwell's property. Then he filed a zoning complaint and a lawsuit against Brower for building a two-story home addition that is too close to Conwell's property line and overlooks his pool. But now that Brower has offered to buy Conwell's home, Conwell has accepted a confidentiality agreement that stops him from talking about or making complaints against GreatStone. While many residents think the GreatStone executives' investment in the Hamlet has been good for the neighborhood, others are skeptical about their motives and uncertain about the future. Resident Steve McInturff said the GreatStone executives probably have increased property values in the neighborhood, and he has no problem with them as neighbors. "It's odd they want to concentrate all together," he said, "but I don't see anything disruptive as far as their personal lives." Still, he wonders about a neighborhood that has become so tethered to the fate of one company. "You worry as to the stability of that company," he said. "What happens to the property values if Brower owns 30 or 40 homes and the company fails? Then those people working for him can't make mortgage payments and they start dumping the houses." - Times staff writer Bill Coats contributed to this report. Tim Grant can be reached at (813) 226-3471.
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From the Times Business report
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