A mortgage warehousing customer of Texas' Fidelity Bank said the bank was as much a victim of its own loose lending practices as the fraud the bank has alleged.

Anna Dobin, president of Foremost Mortgage in Shrewsbury, N.J., said Fidelity exceeded its legal lending limit and was lax in monitoring its mortgage warehousing relationships.

Ms. Dobin's company was identified by Fidelity as one of two mortgage banks that had diverted $15 million in loan payments from a third party to themselves. But Ms. Dobin said Foremost did not divert any money improperly, and has continued to make payments to Fidelity in accordance with its loan arrangement.

"They flipped out because they got ripped off by their other borrowers," said Ms. Dobin. "They've acted totally reckless and out of line, in my opinion."

A spokesman for Fidelity said the bank is trying to make Foremost comply with loan-purchase agreements.

"They have their view of the facts, but the loan purchase agreement is very clear," said Sandy Brown, a Bracewell & Patterson lawyer representing Fidelity. "This was not a traditional mortgage warehouse line of credit."

The bank said Foremost was in possession of $3 million of Fannie Mae payments that should have gone to Fidelity.

The dispute hinges on whether Foremost had borrowed money from Fidelity or sold loans to Fidelity. Ms. Dobin said it had a line of credit from Fidelity, while the bank said it bought loans from Foremost and sold them to permanent investors.

"More than 85% of our Fannie Mae payments go directly to us, then we pay the bank," Ms. Dobin said. "The only reason they believe we screwed them was because we fit the same profile as (the Florida company) because we're a Fannie Mae lender."

She added that her company's total borrowings from Fidelity at one point topped $18 million, well above the bank's loan-to-one-borrower limit of $2 million.

"If we knew (Fidelity's) lending limit was $1.9 million, we never would have done business with them," she said.

Mr. Brown said that since Fidelity did not have a lending relationship with Foremost, it could not have exceeded its lending limit.

Though the company continues to make payments to Fidelty, Foremost has filed suit against the bank for defamation and breach of contract, Ms. Dobin said.

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