The state has revoked the licenses of Maui mortgage broker Kathleen Patricia Morris and her once-prominent mortgage company - actions that effectively shut down her business - after an investigation found "multiple violations" of the state's mortgage loan originator law.
The violations include originating a mortgage loan in a consumer's name without authorization and receiving payoffs for mortgage loans and not remitting the amounts to the lenders, according to a news release from the state Department of Commerce and Consumer Affairs Division of Financial Institutions.
The division on July 16 revoked the licenses of Morris and her Maui-based company, Herman-Morris Enterprises Inc. dba Hawaii's Premiere Mortgage Co. The revocation follows a cease-and-desist order filed by the division in May.
In a news release following the state's decision, Morris said that although she disagrees with the allegations contained in the division's order, she "appreciates" its willingness to reach an agreement.
"I am delighted to be able to put this issue behind me and to move on with the journey of my life. And I agree with the DCCA/DFI that the public interest has been served with a prompt and speedy resolution of this matter. I understand that continuing the process associated with this matter would be lengthy and costly," she said in the news release.
Morris could not be reached for further comment Monday.
While she and her companies were stripped of their business licenses, they still owe creditors money that could be in the millions of dollars. As of early this year, court fillings show that Morris and her husband may owe 100 to 199 creditors $1 million to $10 million.
And she does not have the protection of bankruptcy laws, aimed at helping people who can no longer pay their creditors. Bankruptcy laws liquidate assets to pay debts or to help create a repayment plan, the U.S. Courts website said. Debts that are "discharged" by the bankruptcy court release a debtor from personal liability and prevent creditors from taking action against the debtor to collect the debt.
In January, a U.S. bankruptcy judge dismissed a Chapter 11 reorganization petition by Morris and her husband, David Duffy Herman. The dismissal left the door open to creditors to take legal action to obtain their money without a bankruptcy proceeding, said a Maui bankruptcy attorney not related to the case.
In March, a U.S. bankruptcy judge confirmed that creditors could pursue their debts from the couple and ruled that Morris and Herman could not file for bankruptcy protection against current and possible future debts in the case.
In a written statement to The Maui News earlier this year, Morris and Herman said that they intended to repay as many people as they could and would use revenue from their various businesses, including their mortgage business.
The couple had said in court fillings that their "finances suffered" after Herman suffered a heart attack in Idaho in 2009. Court filings said that they tried to reorganize their debt and to obtain hardship loan modifications.
In the state investigation, the Division of Financial Institutions found the following violations with Morris and her company:
* attempting to pay a complainant to withdraw his complaint.
* using a trade name without properly notifying the state commissioner of financial institutions.
* failing to update financial disclosures after changes in financial status.
* failing to notify the commissioner about a revocation of a previous license.
"After a thorough investigation, we have finally closed the chapter on the inappropriate mortgage loan activities of Ms. Morris and her company," said Iris Ikeda-Catalani, the state commissioner of financial institutions, in a news release. "This revocation action sends a strong message to those who would attempt to deceive Hawaii's mortgage consumers in the future."
Morris also is known as Tricia Morris, Kathleen P. Morris, Patricia Morris, Trish Schaberg, Tricia Schaberg, Patricia K. Morris, Kathleen K. Herman, Patricia Kathleen Herman, K. P. Morris, Kathleen P. Morris, Tricia K. Morris, Tricia NMN Morris, Tricia P. Morris and Patricia Kathleen Morris.
Herman-Morris Enterprises Inc. also does business as Hawaii's Premier Mortgage Co., Hawaii's Premiere Mortgage Co., Lemurian Interiors & Development and Nature's Treasures of Maui.
Morris nor Herman-Morris Enterprises Inc. can engage in any activity that requires a mortgage loan originator or mortgage company license, the state said. Those holding mortgage loan originator licenses associated with Herman-Morris Enterprises Inc. cannot engage in mortgage loan origination activity.
In her emailed statement, Morris thanked the "thousands of people of Hawaii" who allowed Morris and her husband fulfill their dream of homeownership and to enjoy time on Maui. She also thanked those who have supported her.
"I must add that I am blessed to have experienced many years in which the success of the business allowed me to donate over $250,000 to nonprofits and other worthwhile causes," she said.
Consumers who have loans originated by Morris or by Herman-Morris Enterprises Inc. are asked to contact DFI and to provide details of the transactions for possible compensation through the Mortgage Loan Recovery Fund at the Division of Financial Institutions, Department of Commerce and Consumer Affairs, P.O. Box 2054, Honolulu 96805.
* Melissa Tanji can be reached at firstname.lastname@example.org.
* Mortgage company. A statement by Tricia Morris in story on Page A3 on July 23 should have read: "I would like to say thank you to the thousands of people of Hawaii who allowed us to help them fulfill their dream of home ownership and to enjoy their time on our beautiful island of Maui."
A statement in the story about the state revoking the license of the mortgage broker paraphrased her quote incorrectly.
The Maui New apologizes for the error.