This editorial will appear in Thursday’s print edition.
Score one for the people who lost their homes, the shareholders who lost their money and the hundreds of millions who suffered as a result of the financial meltdown of 2007.
Shawn Portmann, once one of the nation’s top mortgage lenders, landed in prison Monday for criminal mortgage practices. His short career epitomizes the naked greed and slick dealing that wrought incalculable harm on this country.
Portmann is atypical in one respect, though: Unlike nearly everyone else who created, sold or repackaged fraudulent home loans, he’s actually behind bars.
For several years, the Puyallup man was one of the nation’s star mortgage lenders. He and his employees – some of whom also landed in prison – closed nearly $1 billion worth of loans during the heady housing bubble.
As senior vice president of Pierce Commercial Bank, Portmann ran a Puyallup-based mortgage-lending operation that developed a lucrative sideline in predatory loans.
His rogue team broke every ethical standard in sight. To push loans through, federal investigators said, he and his employees falsified applicants’ employment records, fabricating bogus job histories and tax documents.
He’d give them phantom jobs at rental agencies he owned. He’d salt their bank accounts with his own money to impress underwriters – then withdraw the money after the loan went through. He’d use a similar scheme to create the appearance that they had paid off their creditors.
Pierce Commercial has since collapsed as a result of the more than 300 bad mortgages Portmann’s operation processed. Half of those loans went into default. The $6.8 million the bank got from the federal Troubled Asset Relief Program will never be repaid.
One of Portmann’s defenses amounted to “everybody was doing it.” That’s no excuse, but there’s quite a bit of truth in it.
Prior to the meltdown, hundreds of dishonest lenders were mass-producing bad mortgages and selling them to other financial institutions. Higher on the food chain, slick Wall Street financiers turned the bundled loans into collateral for securities.
Every step of the way, risks were being off-loaded to someone else. Often those people were ordinary investors and taxpayers who had no idea they were being loaded up with assets built on rotting foundations.
Portmann is one of the very few predatory lenders to be prosecuted, and his reckoning took five years. None of the malefactors of great wealth on Wall Street has seen the inside of a jail cell. A few financial institutions have had to pay large civil penalties – burdens largely borne by innocent shareholders.
Justice has finally caught up with Portmann. It’s never going to catch up to most of his fellow predators.