Hurst records held hostage by family friend

September 18, 2008

By KAREN VELIE and DANIEL BLACKBURN

Investors of the failing Atascadero lender Hurst Financial Corp. (HFC) say they are being prevented from collecting their records by a relative of Hurst’s beleaguered president.

Robert Borba of Stinchfield Financial, another hard money lender, was given possession of the records by James Hurst Miller. Borba is refusing to release any of those records and blaming a state agency for resulting problems.

In early June, an HFC investor group filed termination of its loan servicing agreement and requested, through an attorney, the loan files.

Then, Miller sent a letter to investors on Aug. 21, which read in part: “Due to regulatory sanctions brought forward by the Department of Real Estate (DRE), we are unable to service our loan portfolio. Therefore we are hereby providing you the required thirty-day termination notice.”

DRE officials filed accusations of fraud against HFC last month, but have not taken regulatory action against Hurst through license revocation.

Due to the sanctions, Miller says in the letter, we have decided to hand over investor files to Borba at Stinchfield Financial. “Should you decide to not utilize Stinchfield Financial’s services, you must elect someone in your particular loan to pick up files and sign a receipt.”

Borba, Miller’s longtime friend and a family member through marriage, has declined to release files to investors for a variety of ever-changing reasons. Initially, he claimed his attorney, Tom Madden, prohibited him from doing so.

Madden, in response to inquiries from investors, replied in an e-mail, “I can confirm that I do not and will not represent Mr. Borba or Stinchfield Financial with regard to the Hurst loans, Jay Miller, or Kelly Gearhart.”

Faced with the e-mail from Madden, Borba then claimed the DRE and the Department of Corporations (DOC) had prohibited him from releasing files. He asked investors to be patient while he “waits for instruction from the state.”

However, in an e-mail to an investor, DRE Deputy Commissioner Irene Reyes wrote, “Our department maintains [that] those records belong to Hurst, not Stinchfield, unless he has received permission from the majority of investors on the loan. However, we cannot advise Mr. Borba or Hurst investors of any actions they may need to take. We can only advise you to seek legal advice.”

Borba claims the DRE has created the current situation by “changing their stories every hour.”

“They (the DRE) change their stories again and again,” Borba said. “They told me not to let these files out no matter what. Now, they said it is ok with the proper identification. I don’t know what to do. They won’t give me direction.”

Borba also alleged he is permitted to turn files over only to an attorney or mortgage broker.

“His statement regarding the inability to release files only to a mortgage broker or an attorney is false,” Reyes added.

Borba phoned UncoveredSLO shortly before the posting of this article, “They (the DRE) called me back and said it will take court orders to get files. I think it is best. If anyone asks them (DRE), they will deny it. They said it.”

Sources claim the DRE has turned its investigative attention toward Stinchfield Financial.