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Lake Oswego couple sues local lender over speculative mortgage loans

A Lake Oswego moneylender will go to trial next week in a civil suit alleging she owes more than $1 million to a Washington County couple who invested in speculative mortgage loans on Joanne Kantor's advice.

The couple, John and Sherri Harkness, claim Kantor advised them to make loans - including loans to her friends and parents - without divulging the risks of the loans, her personal relationships with the borrowers or her own commissions and fees. Efforts to reach the Harknesses were unsuccesful.

In legal papers, the Harknesses allege a pattern of advice in investments that drained the equity from two of their properties and gave Kantor's parents a controlling interest in one of their homes. Kantor is currently a loan officer with a branch of HomeStone Mortgage on Meadows Road and is known for civic contributions.

She is involved with a program at HomeStone that began donating 20 percent of its mortgage loan fees to the Lake Oswego School District Foundation in November. HomeStone has given $10,000 so far and projects a $50,000 total this year.

In court documents, Kantor acknowledges she helped the Harknesses borrow money for their loans, but did so only in her capacity as an employee of a mortgage company.

She denies all of the other charges in the lawsuit and said, in legal papers, that if the Harknesses suffered any loss as a result of their borrowing, it's the result of their own fault or negligence.

'I would hope everyone would look at these as allegations. Anybody and everybody has the right to sue. Sometimes our legal system doesn't look at validity of claims versus documentation that shows otherwise,' Kantor said. Her former employers, Sunset Mortgage Company and Directors Mortgage, Inc., are also named in the lawsuit. Both have filed papers saying Kantor acted alone and outside the scope of her duties as an employee while she administered loans with the Harknesses' money.

Fidelity National is also a party to the suit for leaving notarized forms untended, forms the Harknesses say were used to execute forged loans.

In the purported scheme, the Harknesses allege Kantor made small loans to several borrowers as part of a partnership with them but much of the return is still outstanding. The couple say they invested more than $1 million in the loans, all borrowed through Kantor against the equity in two of their homes. The lawsuit alleges that while Kantor made several loans to borrowers using the Harknesses' money, including her own parents, she never secured liens or recorded loan notes in several cases and that some of the documents related to the loans are forgeries and others are falsely notarized.

In the partnership, the lawsuit alleges Kantor agreed to administer one-year loans to credit-worthy people and secure the money by notes and trust deeds on borrowers' homes and construction lots.

Instead, the Harknesses allege that Kantor put their money in her personal bank account, paid personal bills with it and made some loans with the money but tracked it poorly. They say they approved some of the loans but not others and that Kantor did not charge interest on some of the loans as agreed.

Kantor is accused of making several loans to her parents, and then helping them become lien holders on the title to the Harknesses' rental house, valued at $1.5 million. The lien gives them a controlling interest in the home.

Kantor said all of the claims are simply untrue or mischaracterize the complicated nature of transactions made by the Harknesses.

'I didn't give anyone anything,' she said. 'I have no ability to give anybody a controlling interest in someone's home without their permission. They granted it through title.'

The Harknesses are seeking $1.07 million in financial damages from Kantor and her employers, mostly money due on outstanding loans, plus 11.5 percent per annum and late fees.

They filed suit about a year ago, have rejected settlements, and are moving forward to settle grievances through a trial in Clackamas County Circuit Court that begins Wednesday.