A Puyallup banker whose prodigious generation of home loan applications made him one of the nation’s top mortgage loan originators during the housing bubble told a federal judge Tuesday that many of the loans were based on false information.
Shawn L. Portmann, 40, pleaded guilty to two federal charges of conspiracy to submit false loan applications and submitting false statements to a financial institution to obtain a loan.
Under a plea deal negotiated between his attorneys and federal prosecutors, the government dismissed 28 other charges and agreed to recommend a sentencing range of 10 to 14 years in prison for Portmann. Under that bargain, Portmann must make yet undetermined restitution for his financial crimes and forfeit all ill-gotten gains from his false representations. His sentencing is set for Jan. 28.
The ultimate failure of dozens of those loans led to the demise of Tacoma’s Pierce Commercial Bank under a mountain of millions of dollars in defaulted debt.
The former senior vice president at Pierce Commercial Bank, speaking in a voice tinged by laryngitis, told Tacoma U.S. District Judge Benjamin Settle that he had fabricated employment, financial and housing records to ensure that loans would be funded.
According to court documents, Portmann and his associates, operating semi-autonomously from Pierce Commercial Bank as PC Home Loans, generated nearly $1 billion in home loan applications for the bank over several years. PC Home Loans had a separate office from the bank in Puyallup.
The government pictured Portmann as a poster boy for the Wild West atmosphere in the home loan banking business that brought down many banks and drove the nation into its deepest recession since the Great Depression.
“Community banks are a critical part of our financial system,” said U.S. Attorney Jenny A. Durkan. “Mr. Portmann lined his pockets with millions of dollars in commissions and bonuses at the expense of the families who now find themselves underwater on their mortgages. His fraudulent conduct led to the demise of Pierce Commercial Bank and significant losses for other financial institutions.”
During his heyday, Portmann’s income from fees and commissions from his loan generation activities was $1.7 million a year.
Two of his associates, Adam S. Voelker and Jeanette R. Salsi, have already pleaded guilty to lesser charges. A third co-defendant, Sonja L. Lightfoot, is scheduled for a change-of-plea hearing later this week. The four were indicted in August last year after a lengthy investigation by the FBI, the IRS, the Department of Housing and Urban Development and the U.S. Postal Service.
Portmann earned a reputation as a workaholic whose generation of new loans was multiple times what other loan officers were producing. During the time he worked for Pierce Commercial, the government said, Portmann generated about half of the bank’s loans.
Among real estate professionals, Portmann was known for his ability to get a home loan for nearly anyone regardless of their financial history, their employment or credit.
According to the federal plea agreement, Portmann generated false employment verifications for some clients, creating a phony job history and income tax forms for their “work” for one of the rental agencies that he owned.
To meet qualifications for underwriting and for lower interest rates, Portmann asked customers to claim that they were planning to occupy the homes they were buying when they had no intention of doing so.
Portmann’s schemes, the government charged, included salting applicants’ bank accounts with cash from his own personal stash to create the illusion that they had more liquid assets than they actually possessed. Once the loan was processed, he withdrew the funds from their accounts.
The fraudulent activity also included generating cashier checks made payable to the applicant’s creditors to satisfy the bank’s requirement of a healthy income-to-debt ratio. Those checks, which Portmann drew from his own accounts, were never sent to the creditors and were eventually redeposited in Portmann’s account.
Portmann’s and the others’ trial had been set for early November, before the plea agreement was reached.
The former banker will remain free on bond while the government does a pre-sentence investigation. Assistant U.S. Attorney Arlen Storm told Judge Settle that Portmann had been following faithfully the restrictions imposed during his release.
Portmann told the judge he was under a doctor’s care for depression, anxiety and high blood pressure, but that the medications he was taking to combat those conditions did not cloud his ability to understand the plea deal he entered.