The New IMARC: A California Company That Used to Help Chase Down Guilty Parties in Mortgage Fraud Cases Has Changed Its Focus. IMARC LLC Is Now Helping Mortgage Insurers and Others Audit Loan Files to Chase Down Origination Problems That Led to Default

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Back in 2001, a Mortgage Banking magazine article made note of a specialized firm set up to battle mortgage fraud, and the author of the article, in colorful prose, wrote, " ... IMARC is tracking down the bad guys and nailing them in court."

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A decade later, after a number of corporate ownership changes and a mortgage market so decimated it barely resembles the bright, optimistic industry of yore, the Santa Ana, California--based IMARC company that rode to glory, wearing white hats and chasing after bad guys, is no more. In its place is a new IMARC LLC--one that puts its fraud-busting skills to work in the more mundane business of auditing loans.

While auditing is more grind-it-out than "gotcha," it is also a more sustainable and profitable business. More important, it's upwardly scalable and because IMARC can perform large portfolio auditing, it is able to contract with government agencies including the Department of Housing and Urban Development (HUD) as well as with the government-sponsored enterprises (GSEs) such as Freddie Mac and Fannie Mae.

In March, David Kittle, CMB, the immediate past chairman of the Mortgage Bankers Association (MBA) and someone who knows his way around the corridors of Washington, D.C., joined the firm as senior director of industry relations. He will be based in the capital.

Today, IMARC provides ongoing audits on tens of millions of dollars in loans and loan losses for its clients, which are mostly the largest publicly traded mortgage insurance firms.

"We are looking primarily at delinquent and defaulted mortgages," says Phil McCall, IMARC's chief operating officer, "So, our audit consists of breaking down that loan from the time it is given to the homeowner, reviewing documentation and interviewing the borrower to make sure everything is true and accurate."

Audits and loan analysis can be done before or after a default, but the questions to be answered are the same: Why did the loan default (or why is it heading to default)? Is there fraud (and if so, what kind of fraud)? Did the default stem from a personal, catastrophic event such as divorce, sudden unemployment or health problems?

Taking it back

The man responsible for the old IMARC and the new IMARC is Bob Simpson, who is the only link between the two firms. With a partner, Gene Leyton, he founded the old company, then hung on through a takeover and finally reacquired the firm in the summer of 2007. Today, he carries the title of president.

Simpson's background--10 years as a loan officer first and then as an attorney--made him uniquely qualified to create the old IMARC and reformulate the new.

As he says, "I understand loans, I get the origination process and I tell people, 'If you have been playing the game for 10 years and don't know how to cheat, there is something wrong.' If you have originated for 10 years, you know the games that can be played to fund loans that shouldn't be funded. I brought that knowledge and legal background to the recovery of files."

However, it took a series of incidents at the legal firm in which Simpson toiled before he decided to try his hand at entrepreneurship.

In the space of about a month, the big law firm Simpson worked for turned up its collective nose at 20 different cases involving mortgage fraud, because at $20,000 to $25,000 in losses, these were too small to chase after. After witnessing all that, a light bulb went on above Simpson's head--contingency fees! If the clients would pay half of the amount recovered, he would take on these fraud cases.

"No one was doing contingency-fee fraud recovery at the time, the year being 1999, so I decided I would do it. That's how Investors Mortgage Asset Recovery Co. LLC, or IMARC, got started," Simpson explains.

Four years later, in November 2003, Greensboro, North Carolina-based United Guaranty Corporation, a subsidiary of insurance giant American International Group Inc. …