You learn a lot about how wild and crazy the mortgage business had become by examining the case of James Matthew Osborn. As nicely chronicled by the OC Register, Osborne was sentenced to 10 years in jail for stealing more than $550,000 from homeowners who wanted to refinance. Prosecutors say he caused 10 families to lose their homes. And get this: "Even after the police caught up with him and he was awaiting trial," the Register's Andrew Galvin reports, "he was hired by a Newport Beach firm, Worldwidesavers.com, where he continued his crimes." Incredible.

One of Osborn's victims was Steve Ryancarz, a 62-year-old Ohio businessman who wanted to refinance his 5,000-square-foot house to get some cash for his refrigeration company (a major customer had gone belly up, owing Ryancarz's firm $1.2 million). It gets tangled because Ryancarz was trying to do a favor for the daughter of the woman he was engaged to. The idea was to bundle his refinancing with the daughter's loan.

Ryancarz said he found Osborn online in 2003 through HomeLoanAdvisors.com. Ryancarz, who had good credit, figured that by bundling a loan for himself with one for Koslovic, Osborn might find a lender willing to take both. "No matter how much money I had, I always help people out," Ryancarz said. "That's just how I am. Everybody needs a break. What I could do to help them – could help them get to a point where they turn their lives around, it's worth it." There were warning signs, even early on. The first loan Osborn delivered for Ryancarz was bungled, resulting in much higher payments than Ryancarz had expected. Osborn blamed the problem on his boss.

[CUT]

Here's how much sway Osborn was able to exert over his victim: Ryancarz sent Osborn money to bail him out of jail when he was arrested for driving without a license. He also sent Osborn money to pay off a purported fine from the Department of Real Estate, according to records Ryancarz provided. Ryancarz even sent $5,000 to pay for Osborn, his girlfriend and their children to take mini-vacations at the Loews Coronado Bay Resort. "He said, 'I've done all this work for you. You owe me a favor. How about putting us up for the weekend?'" Ryancarz recalled.

[CUT]

Ryancarz never met Osborn in person. Over the phone, he sometimes heard Osborn use abusive language to office assistants, calling them nasty names if they made a mistake or didn't have the right paperwork. "He was smooth to the clients, but as far as the people that done his work for him, he wasn't too kind," Ryancarz said. To dispel any doubts about Osborn, Ryancarz would call the lenders that Osborn said he was working with. Each time, Ryancarz said, he got confirmation. "You gotta figure he's gotta be on the up and up. He's not going to be jeopardizing his reputation talking to these people or lying to you and saying he did," Ryancarz said.

Say what you will about Ryancarz, but California's system for regulating real estate transactions has allowed folks like Osborn to slip through the cracks. There will no doubt be better enforcement in the coming months and years, but it’s too bad that it takes a near-meltdown of the credit markets for people to start paying attention.