Bank sues lender for fraud for misusing warehouse facility

A New Jersey bank wants millions of dollars from a lender, which allegedly misused its warehouse line of credit to fund ineligible loans and sell those properties to its own employees. 

Provident Bank sued Maryland-based My Mortgage for fraud this week in a New Jersey federal court, seeking at least $9 million for the purported misconduct. The lawsuit claims My Mortgage used proceeds from a $10 million warehouse line of credit last fall to buy at least 33 properties as collateral for non-eligible, non-owner occupied rehabilitation loans. 

After that spending spree, the lender allegedly sold those unoccupied, dilapidated properties to its own employees at above fair market price. That includes three home sales to the company's CEO and president, Christopher Schiele, last December. 

The bank said it became aware of the alleged fraud in January, and requested over $8 million from My Mortgage in April. As the lender didn't respond, Provident Bank filed the lawsuit, asking for an additional $1 million in damages.

Neither a spokesperson for the bank nor the attorneys who filed the suit returned requests for comment Friday morning. My Mortgage, and co-defendant Brian Gorgei, chief financial officer and treasurer of the lender, also didn't respond to requests for comment. 

The complaint describes the bank's early 2025 financial agreements with My Mortgage in detail, including a promise by the lender to pay the revolving note balance by February 2027. The warehouse line was only meant for conforming and government-backed loans, the bank emphasized. 

Provident said it made over 35 loan advances to My Mortgage between March and December last year, and that the lender described the mortgages as conventional loans under Fannie Mae guidelines. The suit did not elaborate on how the bank discovered the fraud, or provide any details about the questionable loans. 

My Mortgage, based in Crofton, Maryland, counts 72 sponsored mortgage loan originators and 11 east coast branches in Nationwide Multistate Licensing System records. The retail lender has regularly generated nine-figure origination volume in recent years, and reported $354 million in origination volume in 2024, according to the latest available Home Mortgage Disclosure Act data.  

Provident Bank, based in Iselin, New Jersey, counts over 140 branches across the tri-state area and reported over $662 million in origination volume in 2024.

The agreement between the parties stated that non-conforming loans required the lender's prior approval. Warehouse credit for nontraditional loan types has risen this year, as more lenders veer into those products amid today's stop-and-go housing market.