The biggest difference between Mortgages Ltd. and Landmarc Capital came in recent years, Crantz says — when Coles decided to take on $100 million loans. Crantz opted to stick with smaller, safer loans, most less than $5 million. Crantz says smaller loans are safer for investors because one loan can default without upsetting the entire portfolio.
"We share the same investors," Crantz says of Mortgages Ltd. "I just got off the phone with a client who has $5 million with me and had $5 million with Scott at Mortgages Ltd. The man just had open-heart surgery, and I am scared for his health [because his $5 million at Mortgages Ltd. was borrowed money]. People got wiped out. I mean wiped out. It was just greed and irresponsibility."
Pastor Stacy Lee at his church, Covenant Christian Center, in Peoria.
For years, Mortgages Ltd. investors received monthly checks with pay stubs like this one. (Click
here for more details.) The interest payments halted in June, and now investors just hope to recoup their capital.
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Crantz says the collapse of Mortgages Ltd. may seem complicated to outsiders, but it's incredibly simple to insiders: Mortgages Ltd. lent more money than properties were worth. It also lent more money that it had to give.
"[In late 2007] I went to one of my associates and said, 'I want to verify if these rumors are true.' He showed me properties and showed me what he owed Mortgages Ltd. He was upside-down $4 or $5 million minimum on these properties."
Crantz says a number of Mortgages Ltd. investors attempted to retrieve their money from Coles — with no luck.
"We've had a tremendous amount of investors for the past two years who were trying to get their money out of Mortgages Ltd. to bring over here. And they couldn't get their money out and were getting very scared, asking 'What's going on? What's going on?'"
As a longtime friend and colleague of both Chuck and Scott Coles, Crantz thinks Scott Coles' excessive lifestyle ultimately led to the demise of Mortgages Ltd.
"When you have people throwing money at you, and you create a lifestyle, and you have an ego like that and you've gotta be a big shot, there's not enough business in this town to support that kind of hard-money lending. It's impossible."
Looking forward, Crantz says Phoenix needs to close the coffin on Mortgages Ltd. and learn from Coles' mistakes.
"I don't know if you can call it a true Ponzi scheme. What you can call it is over-lending to have a ridiculous, obnoxious lifestyle. Using other people's money to create some Hollywood lifestyle that movie stars don't even live. That's what happened."
Don Gaffney sees Mortgages Ltd. as one more disaster in a state where defrauding investors seems all too common.
"It's a classic re-learning of what we saw with savings and loan," Gaffney says. "A group that sought out a niche where there was very little regulation. As long as the tide is high and the grass is green, who cares? But the downturn shows they didn't have regulations, reserves, or safeguards."
Walking into the children's room and nursery at the Covenant Christian Center, Pastor Stacy Lee says it's even simpler: Mortgages Ltd. — specifically, Scott Coles — said one thing, and did another.
"When we're in his office he picks up the phone and says, 'I'm sitting here with this pastor and his wife. They're good people. I want you to get the additional monies for them,'" Lee says.
"Meanwhile, that was just surface. Soon, he turns around and stabs us in the back."
