Update: The lawsuit was dismissed on July 31, 2013.
A Florida couple have filed a lawsuit alleging two local real estate professionals conspired to enlist them in a fraudulent home loan to secure a house in Pacific Grove.
Seemingly backed up with tape-recorded evidence, the couple claim loan officer Robert Walker and Realtor Deba Christensen tried to persuade them to fabricate a lease agreement and rental income on their Florida residence to qualify for a loan. When they balked, commercial pilot David Hurstfield-Meyer said, he lost more than $13,000 he had placed in deposit.
Hurstfield-Meyer is seeking return of the deposit as well as punitive damages for fraud, breach of fiduciary duty, negligence, civil conspiracy and aiding and abetting.
Walker is a loan originator with Blue Adobe Mortgage in Carmel.
Walker confirmed that Hurstfield-Meyer and his girlfriend, Tracey Michel, were his clients and were turned down for a loan. He declined to comment beyond that, saying he was unaware of the lawsuit or any claims against him by the couple and could not discuss their confidential loan file.
Neither Christensen nor representatives of Coldwell Banker, Blue Adobe or Summit Funding responded to repeated phone calls and emails this week.
In a Jan. 18 letter to the plaintiffs' attorney, Coldwell Banker lawyer Victoria Naidorf denied Christensen made any effort to get the clients to fabricate lease documents and never recommended they release contingencies without final loan approval. The letter places blame at Walker's feet.
However, Michel and Hurstfield-Meyer released emails and voicemails from Christensen and Walker that appear to support their contentions.
Hurstfield-Meyer told The Herald his troubles began in November when he and Michel came to the Peninsula for a month intent on buying a home near his children, who live here with his ex-wife. An Air Canada pilot, he intended to maintain homes on both coasts.
After completing an online inquiry, they were contacted by Christensen and agreed to work with her. She discouraged them from seeking financing from Bank of America, which had preapproved the couple, recommending they go to Blue Adobe and Walker, "who she works nearly exclusively with and claims that he gets unbelievable rates," according to the lawsuit.
They followed her advice and Walker came through, Hurstfield-Meyer said, verbally approving the couple for as much as $600,000 on a 30-year fixed FHA loan at 3.2 percent. Hurstfield-Meyer and Michel quickly fell in love with the "Dollhouse," a pink and white cottage at Laurel and Congress avenues in Pacific Grove.
The sellers accepted an offer of $465,000 and escrow opened, with Hurstfield-Meyer putting down a $13,350 deposit.
According to the suit, Christensen and Walker conference-called Michel in mid-December and told her underwriters might require that the couple lease their Florida home to show additional income. Both allegedly told Michel the lease did not need to be authentic.
"All (they) had to do was to get a friend to draw up a lease agreement with them and get the friend to deposit a check into their account until the loan was approved ... then tear it up," the suit states.
When Hurstfield-Meyer objected that the plan would be illegal, the suit alleges that Christensen told him: "Money is tight in today's market and people are looking for ways to get loans approved. It's not like trail blazing, everyone does it."
Hurstfield-Meyer refused and, in a Dec. 20 email, Walker said he had "submitted the loan without using any rent." Then, on New Year's Eve, Hurstfield-Meyer said, the agents each informed the couple that Walker had received verbal approval on the loan and they thought it safe to release contingencies.
Hurstfield-Meyer said he had already told Christensen not to release contingencies until Blue Adobe approved the loan "without changes." Christensen's attorney, Naidorf, maintains Michel gave her Realtor an unconditional go-ahead.
Later on Dec. 31, Walker's assistant called Michel asking for a copy of the lease and confirmation of a rental deposit in the couple's bank account. Michel objected that the lease was not a condition of the loan.
"It is now," she was told, according to the suit.
The couple assert they immediately called Christensen to stop the deal, but she had already released contingencies. The next day, the suit states, Christensen reiterated the need to "do up a fake lease." They refused.
Naidorf denies that Christensen made such a suggestion or encouraged them to release contingencies without final loan approval.
"The (emails) establish that Ms. Christensen acted properly and professionally," she stated in a Jan. 24 letter to the couple's lawyer. "She neither encouraged nor pressured your clients into removing the financing contingency. ... She gave no assurances it was 'safe' to do so as you have alleged."
However, on a voicemail provided to The Herald, Christensen states, "I think we're pretty secure now" to release contingencies.
On Jan. 1, after learning his deposit was gone and the loan would not be approved without a lease on his Florida property, Hurstfield-Meyer got another message from Walker.
"So the story is still the same, we need a lease," Walker says on the voicemail. "That seems to be the quickest way through the maze here to get the cheese.
"I'm sure somewhere out there someone's going to step up and do this," Walker continues. "It's not like you're really even asking for that big of a favor. Basically you're just looking for a couple grand to be loaned to you for about two weeks. ... The lease? You know, who cares about the lease, I mean no one's going to enforce the lease."
According to Naidorf, the sellers offered to refund half the deposit, but Hurstfield-Meyer demanded it all. In her letter, she cautioned him that pursuing a lawsuit would end up costing him more than he was seeking.
Hurstfield-Meyer has taken his allegations — and his emails and voicemails — to his congressman, senator, Monterey County prosecutors and the California Department of Real Estate.
Managing Deputy District Attorney Annie Michaels said her office referred Hurstfield-Meyer to the Department of Real Estate, which is "working on the case." That department investigates potential administrative violations. Michaels said the case "might well come back to us (for criminal prosecution) in the future ... depending upon what their findings are."
Hearing the details of the allegations but not the names of the parties involved, Sandy Haney, chief executive officer of the Monterey County Realtor's Association, said: "That sounds like fraud to me. If that can be proven true, there's a couple of agents who are in trouble."
Haney and former state Real Estate Commissioner Jeff Davi said loan fraud remains a problem, in part due to strict lending practices put in place after the housing market crash.
"Fraud is still a big thing on the Department of Real Estate's radar because the market is so tight, people are desperate," Haney said.
Said Davi: "After what we've been through in the last six years ... I'm surprised that there are still people out there who think it's still OK to lie to a lender, (but) it happens a lot and it's very illegal."
Last year, the Department of Real Estate filed more disciplinary actions against agents than at any time in its 100 year history, revoking or accepting surrender of more than 1,100 licenses. Spokesman Tom Poole said the department is on pace to match the number this year.
Without judging the veracity of the claims, Davi said there is a lesson to be learned in the couple's story.
"Don't release contingencies until you have hard-copy loan approval you're comfortable with," he said. "An email from a loan broker is a little risky."
Virginia Hennessey can be reached at 753-6751 or firstname.lastname@example.org.