REALTY — Mortgage Minder

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Think you’re being overcharged on a residential or commercial loan? For A

cut of any refund, NRG financial will do the math and take your case to lender

Unbeknownst to them, many homeowners across the country are overpaying on their mortgages, often by a lot. So are commercial property owners.

And that’s a problem that NRG Financial of Marina del Rey wants to help rectify, for a cut of the action. The company’s loan auditing division checks adjustable-rate residential and commercial mortgages for mistakes. The service is free, and if an error is found, the customer and NRG split the refund 50-50.

NRG’s biggest recovery to date was a $79,924 mistake by a major thrift on a commercial loan.

Such an outcome not only makes the borrower happy, but can protect the lender from possible litigation down the road. “We try to keep it out of court. We’re benefiting the lender and consumer,” said Victor Costello, executive director of NRG a broad-based company that also brokers mortgages, manages apartment buildings and brokers real estate sales deals.

The company has been auditing loans since 1996, handling about 40 such audits in its first year and increasing to 110 last year. The service has been a big driver of NRG’s revenues, which have expanded from $325,000 the year before the loan auditing began to projected revenues of about $1.5 million for this year.

It also has helped that the real estate market has emerged from the recession and brought with it a host of financing and refinancing activity, though rising interest rates are starting to put a damper on things.

Real estate wunderkind

Giovanni Giammarco, NRG’s president and owner, has seen a few peaks and dips in the business since he first got into real estate 18 years ago, straight out of high school.

He had made enough money from working at his father’s printing firm to buy several single-family homes at auction in his late teens. When he refinanced the properties, he impressed the mortgage broker enough that Giammarco was invited to come on board as an agent.

Giammarco and a friend had opened a branch office for Merit Mortgage but decided to part ways in 1988, when Giammarco (who by that time had received his broker’s license) went into business for himself, incorporating as National Realty Group doing business as NRG Financial. For a year, he ran the mortgage brokerage out of his Marina del Rey ocean-view condominium, contracting out the loan processing.

“It started getting a little crazy having an office in my house,” he said.

So he opened a separate office in 1989 and was on a roll until 1994, which Giammarco describes as “the beginning of the worst year of my life.” Earlier in the recession, he had thrived by picking up the customers of failed competitors. But after the Northridge earthquake, the mortgage business dried up even more, and he entertained three offers to merge his company with others.

Instead, he continued going it alone. “I borrowed from Peter, Paul, Mary, my mother and brother and my credit cards to stay afloat,” he said.

At the end of 1994, he bucked common wisdom and purchased an eight-unit apartment building. Due to the soft market, his purchase price was a bargain, so tenants’ rent payments were more than enough to cover his mortgage payments, generating a positive cash flow. A few months later, Giammarco purchased another property with investors, becoming a syndicator in the process meaning a broker who brings investors together to buy properties, taking a fee in the process.

He subsequently started the NRG Management division, which now manages 17 apartment complexes, the largest of which has 30 units. Giammarco said he buys, fixes up the properties and holds them long term, occasionally selling smaller buildings to immediately trade-up to larger ones.

Going a new direction

In 1996, Giammarco met Costello, who had been working in the apparel business but was doing loan auditing on the side. The two decided to partner and form another division, NRG Loan Analyst.

Costello said 35 to 40 percent of the loans they audit have some sort of error in the lender’s favor. Problems stem from antiquated equipment, human error or a glitch when loans are sold and the data is transferred. While banks and other mortgage lenders are supposed to perform internal audits, they apparently don’t always catch mistakes, Costello said.

Carmel-based motel investor Herb Johnson was one of the beneficiaries of the service. Johnson first received a blind solicitation in the mail, then Giammarco spent a year convincing him to submit one of his mortgage loans to an audit. NRG recovered a $38,000 refund on his mortgage.

“I was a hard sell. I didn’t believe he could do it,” Johnson said. “Ultimately, I decided I had nothing to lose. (NRG’s) amortization schedule was more accurate than the lender’s. He was 100 percent convinced he could recover the money.”

Costello said that when there are overcharges on a loan, there often are also undercharges, but the net effect is generally in the lender’s favor. By law, a lender cannot recover the underpayment, but it could net out the two to reduce the refund.

Giammarco hopes to grow its audit business through the company’s Web site, where within the next year consumers will be able to perform the audit themselves. NRG’s take for such self-directed online audits would be less than the 50-50 split it now garners, but the potential for increased volume is considerable, Giammarco said.

Quoting the late billionaire oil man J. Paul Getty, Giammarco said, “I’d rather have 10 percent of 100 people’s effort than 100 percent of my own.”

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