The collapse of an area mortgage broker will have serious repercussions locally, an attorney representing the company said in an interview last week.
"This is going to be a major disaster," Dexter K. Case, the attorney for Personal Financial Management, said.
The company's mortgage practices, he said, have put 800 area homeowners in financial crises that could lead to home foreclosures.
"It's going to affect different people differently," Case said, "but the bottom line is (consumers) are out the money; a lot of them didn't know what they were doing."
The state Attorney General's office is investigating the mortgage practices of Personal Financial Management, also known as OPFM Inc. and Image Masters, which had offices in Berks and Lancaster counties.
The AG's office said it has received hundreds of calls and e-mail complaints from homeowners who suddenly have seen their monthly mortgages payments nearly double — and have lost up to $100,000.
According to PFM customers, the firms' president, Wesley A. Snyder, wrote OPFM mortgages for his company's customers while at the same time brokering actual mortgages in the customers' names with legitimate banks and mortgage lenders.
But the customers were aware only of the much cheaper OPFM mortgages, for which they received monthly statements and on which they made payments.
"It was a contract is all it was — you just pay me the reduced amount," Case said.
Customers were not aware that the actual mortgage bills on their homes — which were substantially higher than what the customers were paying and which were calculated at a significantly higher rate — were sent to Snyder's company, which paid the higher bills.
But with the firm's collapse — Snyder filed Chapter 7 bankruptcy protection for OPFM and its five subsidiaries last week — customers learned that the OPFM mortgages didn't exist and that they were responsible for the higher-rate mortgages from the actual lenders.
Initial reports sent out by the company early last week suggested that the company's collapse would affect only a few Lancaster County customers who had given Snyder cash from home equity from refinanced mortgages in an arrangement called an equity slide wrap-around mortgage program.
But it appears that scores of Lancaster County homeowners are affected — and not just those in refinanced mortgages.
OPFM customers who have contacted the Intelligencer Journal say the company convinced them to give Snyder tens of thousands of dollars by taking new mortgages at well above the cost of the home.
In what customers describe as a "double settlement," they would settle on their mortgages and then give Snyder the extra cash — anywhere from $10,000 to $100,000, Case said.
The pool of money Snyder collected, which experts suggest could have been more than $50 million, was used to pay the difference between the smaller monthly amount customers paid to Image Finance and the actual mortgage brokered by OPFM.
Case said Snyder invested the pool of cash, and he did well for more than 20 years.
"Mathematically, that works out fine so long as that money is invested," Case said "It falls apart if that money is not invested, and eventually it collapses, which is what happened here."
Snyder, who is listed as the sole officer on some mortgages OPFM brokered, has not explained how or if the millions forwarded to him were invested. He has listed liabilities in excess of $100 million, leaving hundreds of mortgage holders potentially in default.
As of Wednesday no complaints had been filed, but that changed Thursday, Nils Frederiksen, deputy press secretary in the attorney general's office, said.
"When you're dealing with mortgages, there is a ticking clock," Frederiksen, said. "The sooner the better in terms of hearing from consumers; that gives us a better ability to work with banking and a better ability to intervene on (a customer's) behalf."
Complaints started rolling in after consumers received letters Wednesday informing them that OPFM had closed. The letters also noted that some consumer payments had not been forwarded to consumers' principal mortgage lenders, according to the AG's office.
"Most people didn't comprehend all of this — they trust that it is what is and that's it. They sign on the dotted line, and that's it," Case said. "Now they're waking up with this letter telling them it is not so."
Case said the decision to shut down OPFM came last weekend.
"Up until that, (Snyder) felt he was still going to bail this thing out," Case said. "But it became apparent that that was not going to happen, and we shut it down on Monday."
A former employee of Personal Financial Management who declined to be identified told the Reading Eagle that the staff of 30 was abruptly let go Sept. 14 — the Friday before the shutdown.
The ex-employee said nobody on the staff appeared to know of any problems and that some employees had invested large sums with the company.
The ex-employee said the news came as a surprise, given Snyder's reputation in the Exeter area, where he has volunteered for and supported many civic groups and causes.
The Attorney General's office said it is working this week with state banking and securities regulators to thoroughly investigate all consumer complaints and is asking OPFM clients to file formal complaints.
To file a complaint, call the Attorney General's consumer protection hot line at (800) 441-2555 or visit the Attorney General's Web site: www.attorneygeneral.gov/complaints.aspx?id=451.
Consumers are asked to provide copies (not originals) of all paperwork involving their transactions with Personal Financial Management or related companies, including:
State Attorney General Tom Corbett said consumers may have entered into mortgage/investment agreements with the following companies: OPFM Inc.; Personal Financial Management; Image Masters Inc.; Mortgage Assistance Professionals Inc.; Mortgage Assistance Professionals Inc. II; Discovered Treasures Inc.; Dividit Inc.; or Wesley Snyder.
E-mail: pburns@lnpnews.com