The following story was reported by The Utah Investigative Journalism Project in partnership with Salt Lake City Weekly.

As Utah’s real estate market sizzled during the COVID pandemic, Matthew Borsodi, a compliance officer at one of Utah’s largest mortgage lenders, filed a federal complaint alleging that his former employer skirted rules aimed at protecting consumers from a repeat of the 2008 housing crisis.

In his May 2021 complaint to the Consumer Finance Protection Bureau, Borsodi claimed Intercap Lending failed to follow federal appraisal independence requirements established by the Dodd-Frank Act of 2010. Among the evidence and allegations put forth in the complaint:

— Borsodi said Intercap’s appraiser lists—compiled before he was hired on—had been assembled with input from sales staff who stood to benefit from higher home prices.

— Borsodi also cited an email from a branch manager asking him to call an appraiser for a property value before the appraiser had completed the job. Borsodi felt this also constituted a federal rule violation.

— Borsodi said that Intercap’s president—an attorney by profession—ordered him to follow through with that branch manager’s request.

— After that happened, Borsodi said the work environment became toxic, prompting him to quit. Even though he said he was convinced into staying on with the promise that appraisal lists would be dismantled and redone, he continued to feel that “no one understood the rules.”

Borsodi believed Intercap was not alone, that other mortgage lenders were also sidestepping these rules, but it was his former employer he felt obligated to call out. Borsodi said he feels exasperated as he has heard no response to the complaint he filed in 2021 and refiled in the summer of 2022 after he ultimately exited the company

But Intercap president Brock Worthen is not surprised that nothing has come of the complaint because, he said, Borsodi’s allegations are without merit.

“I was surprised to hear that a complaint was filed in 2021, but I’m not surprised that no action was taken by the CFPB—the most active regulatory body in the country—because they’re not real issues,” Worthen said of Borsodi’s allegations against Intercap.

According to UtahRealEstate.com, in June 2022 the median price of single-family homes sold in the Beehive State hit $594,000, up an astonishing 19.5% over the previous June. And the median number of days on the market before the sale still hovered in single digits.

But by November 2022, median sales on single-family homes had dropped to $525,000 and median days on the market had risen to 39—indications of a significant cooldown due to several factors, including higher interest rates and decreased demand.

Borsodi managed the appraisal desk at Intercap Lending from late 2019 until June 2022, when he quit his job there for what he said was his third and final time after two earlier near-exits.

However, he and Intercap’s top executive often disagreed over how appraisal independence requirements (AIR) should be interpreted—a schism that appeared to deepen as the housing market heated up.

As Intercap’s appraisal desk manager, Borsodi viewed his role as providing a clear separation between appraisers and commissioned staff who could benefit from higher appraised values, by vigilantly enforcing appraisal independence rules.

He described how cozy relationships between appraisers, real estate agents, lenders and other commissioned parties in the industry continued to flourish and influence how appraisals got assigned.

His concerns mirror noncompliance issues raised by Fannie Mae in a January 2021 letter.

A leading source of mortgage financing in the United States, Fannie Mae had found that 25% of its lenders were cited for noncompliance of appraisal independence rules.

“Lenders must have the appropriate guardrails in place to foster appraiser independence and prohibit influence in the development, reporting, result, or review of an appraisal, not just the ordering of an appraisal,” the letter said.

Worthen not only denies the company did anything wrong but said if there were any alleged violations, Borsodi “did not raise those with us.”

Moreover, Worthen alleged that Borsodi threatened to badmouth Intercap in the press unless he was paid $1.5 million. Borsodi in turn accused his former employer of trying to buy his silence through a lucrative severance and non-disclosure agreement.

“It feels like he’s trying to create this narrative that shows he’s the hero that was trying to get us to stop doing illegal, bad things,” Worthen said. “But it’s just not true.”

Caught in the Wave

Intercap’s business boomed in 2020, as the pandemic opened the door for remote workers who found housing in Utah much more affordable than in California and other densely populated areas. With Intercap processing close to 1,200 appraisals per month, Borsodi feared he could be personally liable for substantial civil fines if the company was cited for violations.

He also worried that artificially inflated home values could negatively impact homeowners who could be “left holding the bag again.” The housing bubble meltdown of 2008 had affected him personally.

“I became one of 2,500 underwriters looking for a job in Tampa, Florida,” as massive layoffs reverberated through the mortgage industry, Borsodi said. He lost his job, then his house—and ultimately moved across the country to find work and get reestablished.

But it wasn’t easy settling in at Intercap and, in fact, Borsodi named three times he resigned during his three years there. But he kept coming back with hopes that things would change.

Borsodi said his repeated efforts to enforce appraisal independence rules brought pushback—and even anger—from branch managers and executives within the company. Part of the problem, Borsodi believed, was that employees had not been adequately trained in federal requirements regarding appraisals. And in the midst of a surging real estate market, those rules felt like a clog in the system.

Borsodi quit the first time in August 2020 after he discovered the appraisal panels he’d been hired to oversee had been set up—prior to his joining the company—with input from commissioned sales staff. But he agreed to stay on with the promise that those panels would be dismantled and set up differently. That panel restructuring finally happened in July 2021, Borsodi said.

Borsodi’s second resignation came in May 2021. He cited a January 2020 email from an Intercap branch manager as just one example of employee behavior that brought him to that point. The manager had asked Borsodi to quickly set up an appraisal panel consisting of four specific appraisers.

The email noted that this short list would be for “our Non-QM origination (for the time being),” referring to riskier mortgages that homebuyers might not be able to pay off

An Intercap executive emailed him later that day regarding the same transaction, asking him to make sure the appraisal got ordered “correctly” for this particular project. By then, Borsodi believed the so-called independent process had been totally compromised.

“Sales cannot recommend either an appraiser or an appraisal management company. That was basically my job,” Borsodi said.

The final time Borsodi quit his job at Intercap occurred in June 2022. “The president of the company ordered me to call an appraiser to get value on a property prior to the appraisal being completed, which is an [Appraisal Independence] rule 5 violation,” Borsodi said.

The buyer had requested that value midstream to possibly switch the transaction from a purchase to a refinance.

But Borsodi said that decision should be made long before the appraiser heads out to the property.

Wild Ride

Worthen took the helm of Intercap Lending in October 2017 and oversaw the intense growth that erupted in 2020.

“It was absolutely a wild two years in terms of the strain and demands put on everyone in the industry to either help people save hundreds of dollars per month in their mortgage payment or help people get into homes,” Worthen said in an interview. “For most of our team, it was six- to seven-day work weeks for 100 weeks straight.”

Intercap initially launched in 1978 and Josh Romney—son of Sen. Mitt Romney, R-Utah—purchased the business in 2016, relocating its headquarters to Utah in early 2017. The younger Romney declined to comment for this story.

“I talk to Josh, but he’s not hands-on in terms of day to day,” Worthen said. “(Josh) is involved in strategic planning, but he’d be the first one to tell you that he’s not a mortgage expert.”

In March 2022, National Mortgage News listed Intercap among the top 50 mortgage companies in which to work.

“We have the best team in the industry,” Worthen said at the time. “We care about each other’s success and exceeding the expectations of our customers.”

The company holds licenses in 42 states and employs about 430 people.

In an August 2022 phone interview, Worthen described the link to Romney as special motivation to “do things the right way.”

“We try to be better than our competitors with compliance because we understand that because the Romney name is associated with Intercap, it’s a news story,” Worthen said.

And Worthen said he often disagreed with Borsodi on how appraisal independence rules should be interpreted.

“The problem is the rules are not the way Matt always sees them. I don’t think we’ve done anything wrong,” Worthen said. “I’m confident that we used a higher variety of appraisers than anyone in this valley—that’s what goes to the heart of AIR compliance.”

Worthen, for instance, disagreed with allegations from Borsodi about the incident where a branch manager pushed to get a property value before the appraisal’s completion. Borsodi saw it as a clear violation, but Worthen said it was commonplace in the industry.

“Again, never to influence value but to help a borrower understand if the best course of action is to close the transaction as a refinance or a purchase—because they have that option,” Worthen said.

And Worthen balked at any allegations that the company repeatedly used the same small pool of appraisers to achieve a certain result, citing over 300 appraisers used in the past several years.

“So any allegation that we’re in bed with like five appraisers is just false.”

Plus, he added, an inflated value is more of a red flag than an opportunity for illicit gain. “If a value comes in inflated, all it means is that our borrower is underwater. Why would we ever want that for our customer?”

Peter Christensen, a Montana-based attorney who focuses on real estate valuation services, said there is an incentive for mortgage lenders to chase higher values during the heat of the market.

“They can get the loan if they can get the value that they need,” Christensen said.

He added that while federal appraisal independence requirements strictly adhere to the letter of the law, the flip side is no one is really enforcing that law.

“It’s possible there could be regulatory examination … telling lenders they need to do a better job,” Christensen said. “But as far as chasing down violators, I haven’t seen that happen. I think they’re just not interested.”

Flawed Systems

Mike Carter has more than three decades of experience in the mortgage industry—as a banker, mortgage lender, head of a title company and, since 1996, a certified residential appraiser. Carter owns VERSAppraise with offices in South Jordan and Lehi. In a recent interview, Carter defended Intercap, saying he has enjoyed a good working relationship with the company and hopes it can continue.

“Have they been perfect? No,” Carter said. “But as far as some of the other companies I’ve let go over the last three years because of their lack of ethics, Intercap is head and shoulders above those.”

He then described his work and what he viewed as a somewhat flawed process. “What you do as an appraiser is develop an opinion of value,” Carter said. “It’s based on factual data, but what you’re preparing and providing to your client is an opinion—that’s all it is.”

To be credible, Carter said, that opinion should be based on weighted percentages for location, along with similarities in utility, function and dates of sale.

But as demand for homes outpaced supply, a snowball effect kicked in. In recent years, Carter said he saw a sharp uptick in purchase contracts where a buyer agreed to pay as much as $50,000 above the appraised value.

“I came in low on plenty of deals because the values just weren’t there. People were willing to pay more than the property was worth—and that’s their choice,” Carter said.

But those higher sales prices then become the comparables for subsequent appraisals. “The inflated sales price becomes the fact,” Carter said. “That’s … how that whole thing went so rapidly out of control.”

With recent indications that the market is slowing down, Carter foresees a bumpy road ahead and is concerned that some recent buyers could find themselves upside down in their loans. By last summer, Carter said in a phone interview, “We have more loans nationwide ready to foreclose than we did in 2007 and 2008.”

For Borsodi, the stakes of a housing collapse like 2008-2009 are exactly why he was so adamant about following the rules—and also why he tended to be unpopular at work.

One May 2021 incident—detailed in a series of emails—involved a branch manager who was eager to arrange an appraisal himself rather than waiting for Borsodi’s independent process to accomplish the task.

“I can call the listing agent if need be, and schedule anything,” the branch manager told Borsodi by email.

Borsodi replied, “No, please stay out of the scheduling. It is against the rules and multiple laws.”

Another incident, also documented by emails, involved a branch manager who recommended appraiser options for a Bear Lake property.

The branch manager’s supervisor ended up scolding Borsodi, saying the branch manager was only trying to help and “didn’t need to be torn apart for it.”

Borsodi replied that “if my tone was … stern, it’s because she is asking us to break the law.”

For Worthen, the incident was a classic overreaction by Borsodi. The branch manager simply recommended an appraiser who lived in the area because it was hard to find one who would be willing to drive all the way to Bear Lake, Worthen said.

In March 2021, a branch manager in St. George bristled at an appraiser who submitted two appraisals that came in lower than expected—one by $15,000 and the other roughly $65,000 below the purchase price.

“He is a menus [menace] to the appraisal community,” the manager emailed Borsodi. “His job isn’t just to do a fast evaluation and use the safest comps available … his job is to evaluate if the sale price agreed upon by both buyer and seller is a fair and just price. He does nothing to try to prove this in any way!”

Borsodi then replied that Intercap had to comply with Dodd-Frank and applicable state laws. That email exchange included Worthen, who had become Borsodi’s third and final supervisor.

If Worthen had to put himself in between Borsodi and a branch manager, he said it wasn’t to pressure Borsodi to break the law but usually just to intercede because Borsodi had been too aggressive and brusque with branch managers. “I had to mediate hurt feelings,” Worthen said.

Worthen defended the way Intercap conducts business, describing Borsodi’s role at Intercap as making sure that appraisers were vetted.

“No one coerced him into adding someone to a panel,” Worthen said.

Borsodi’s complaint to federal regulators, however, included two email exchanges from different situations where a top executive at Intercap, who also was a branch manager, had recommended panels of appraisers to Borsodi and copied the emails to the company’s chief operating officer.

For Borsodi, having a top executive on the sales side making recommendations and looping in the chief operating officer amounted to undue pressure. Worthen disagreed, however, and said those two individuals had valuable input to offer.

“There’s a difference between saying I want Jane Doe to appraise this property and saying Jane Doe is a highly respected appraiser,” Worthen said.

Also, he didn’t think it happened very often.

“I think I would have heard from [Borsodi] if it did,” Worthen said. “He would have let me know loudly.”

The chief operating officer included in those emails has been lauded on Intercap’s website, where she was praised as a “driving force behind Intercap’s quick rise in production of over 3,500% since 2017.”

The website noted how an industry report credited her for the company’s “reputation of closing times that are half the time of Intercap’s peers.”

In a recent interview, Worthen was less troubled by the emails than by the fact that Borsodi had kept the emails against company policy.

“Matt loves the rules, unless he wanted to break them—and that’s the challenge,” Worthen said.

Exit Interview

Worthen and Borsodi’s biggest disagreement concerns Borsodi’s departure from the company—and what took place in his exit interview.

“When Matt resigned, he said ‘Pay me $1.5 million or I’ll go to all the media outlets and raise all these alleged violations’,” Worthen said.

Borsodi described the incident very differently.

Worthen’s initial plan, Borsodi said, was for him to stay on and work out a way for Intercap to transition from having its own independent appraisal desk to working with an appraisal management company.

“Then they’d give me a severance package of six months and let me go,” Borsodi said.

He said he declined that offer, and also refused to sign a nondisclosure agreement.

At that point, Borsodi said Worthen asked for his “number”—which Borsodi took to mean the amount it would take to keep quiet.

Borsodi said he responded flippantly with $1.5 million, an exorbitant number he knew wouldn’t be accepted and which was never meant as a serious request.

He said the company was trying to buy his silence and when it didn’t work, they took the flippant remark and are now using it to try and discredit him.

Worthen described Intercap’s policy of providing severance to employees as routine. “That’s what we do,” Worthen said. “If someone is leaving, and it’s not 100 percent their decision, then we give them a severance.”

But in their final meeting together, Worthen said, Borsodi confronted him with an absurd ask in exchange for his quiet exit.

“That’s when he said it’s $1.5 million—or he’d go to the press and also make complaints,” Worthen said, adding that he had no idea at that point that Borsodi had already filed a federal complaint.

Worthen said that others familiar with the conversations could corroborate his account, identifying Rick Silva, a seasoned appraiser used by Intercap. Silva told the Utah Investigative Journalism Project that Borsodi mentioned the $1.5 million figure to him prior to his final meeting with Worthen, but Borsodi denies this.

“It was a spur of the moment situation that happened that day,” Borsodi said.

Borsodi stands by his allegations against Intercap even though he knows it will mean the public airing of Worthen’s claim against him and the possibility it will cost him his current job.

Borsodi said he believes the complaints are serious but is uncertain whether they’ll be addressed.

“This law was set up to protect the general public,” Borsodi said, “and nobody seems to want to enforce it or adhere to it.”

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