Audit sharply criticizes Mortgage Lending Division

While the state slid into the mortgage crisis, the Nevada Mortgage Lending Division failed to perform annual examinations on more than three-quarters of the lending companies it oversees, Legislative auditors say.

The sharply critical audit drew equally sharp comments from the Legislative Commission's audit subcommittee Thursday.

"This is almost an indictment of government," said Assemblywoman Sheila Leslie, D-Reno. "I don't even know why we have this division."

Division Administrator Joe Waltuch and his deputy Nancy Corbin told lawmakers they have fixed nearly 80 percent of the problems raised by auditors. Waltuch said the division is accomplishing its statutory mission.

Corbin said the majority of those licensees not examined "are the small mom and pop companies that showed no lending activity so we did not examine them."

Waltuch said many licensees can't be found because they have simply shut down and abandoned the license, many leaving the state. He also pointed out that the audit deals with fiscal 2007 and that he inherited most of the problems when he took over in September of that year.

"I completely do not agree you are accomplishing your mission," said Leslie. "I'm hearing from you today a lot of excuses, a lot of minimizing."

She said auditors found not only that 77 percent of annual examinations were not done in 2007 but that 87 percent of high risk companies were not reviewed " "The ones the public needs to be concerned about."

"The performance is abysmal and I don't know how anyone could say otherwise," she said.

"We created this division because people were hurt badly," said Assemblyman John Marvel, R-Battle Mountain, joining Leslie in the criticism.

They and Sen. Bob Coffin, D-Las Vegas, also criticized the division for not filling 10 examiner positions added by the 2007 Legislature to get Mortgage Lending up to speed on its reviews of licensees.

But Waltuch and Corbin said they aren't hiring now because they see the number of licensees dropping dramatically and because of the state's budget crisis. The number of licensees has fallen from 2,150 to 849 in the past four years.

Auditors also found the division failed to ensure that licensees submitted required financial documents including audited financial statements from high-risk licensees, didn't follow up on complaints, failed to collect some $490,000 in assessments owed in 2007 and 2008 and didn't collect administrative fines and settlement agreements totaling some $975,000.

Waltuch accepted all the recommendations and said work was well under way to fix most of the problems.

Auditors were also critical of the Nevada Equal Rights Commission, which they said has a backlog of 617 open cases averaging 179 days old. Because of declining productivity, they said, the commission failed to maximize federal contract revenue that could help cover its costs and lost more federal funding by delaying billing the federal government.

Coffin said the backlog must be addressed on behalf of individuals who are being discriminated against.

"It's horrible to be hung out to dry by the government," he said.

Commission Administrator Dennis Perea said the cases dragging that backlog up are mostly in the attorney general's office and are mostly more than a year old. He said in fiscal 2008, the division handled some 1,600 complaints. He said productivity has gone up more than 100 cases a month.

Perea accepted the audit recommendations.

Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.