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HUD Suspends FHA Lending Authority For Two Lenders

Tampa company accused of fraud, sexual harassment

January 15, 2002


The Department of Housing and Urban Development (HUD) announced this week that its Mortgagee Review Board (MRB) withdrew authority for two separate mortgage companies to make or acquire Federal Housing Administration (FHA) insured loans. The MRB also proposed a three-year withdrawal of FHA approval from three other lenders.

The MRB is comprised of FHA Commissioner John Weicher and six other senior HUD officials. Weicher said, "lenders who think about breaking the rules should take notice that HUD will aggressively enforce its rules and the consequences can be severe."

According to HUD's announcement, the Foundation Funding Group Inc., of Tampa, Florida, permanently lost its FHA approval because of "serious violations of FHA lending requirements that included improper cash-outs when originating streamlined, refinanced mortgages, and the improper refinancing of fixed rate and adjustable rate mortgages." HUD also said that Foundation Funding failed to implement a HUD-mandated quality control plan that requires lenders to make adequate and timely reviews to detect possible violations, including fraud.

Foundation Funding is the parent of GreatStone Mortgage, which in September surrendered its lending license to the Florida Department of Banking and Finance. In its announcement, Florida said the license surrender was the result of complaint filed in August after GreatStone declined to permit an examination of its books, accounts, and records as required by law.

Former employees of GreatStone met with the St. Petersburg Times (Times), reportedly accusing the company of fraudulent activities and sexual harassment.

HUD withdrew FHA approval from Whittier, California-based Omega Financial Services, Inc., for three years. HUD said the company used falsified documentation in originating FHA loans, and failed to implement a HUD-required quality control plan. Omega did not return calls from MortgageDaily.com.

HUD said its MRB also proposed a three-year withdrawal of FHA approval from a New Jersey lender, a Tennessee lender and a Utah lender for violating a number of FHA requirements, including improperly qualifying loan applicants, failing to implement a quality control plan, failing to remit upfront mortgage insurance premiums and failing to submit loans for endorsement to FHA in a timely manner.

According to HUD spokesman Lemar Wooley, HUD will not release the names of the three lenders recommended for suspension until the 30 day appeal period is up.

Sam Garcia has been in mortgage lending since 1980, and is managing editor of MortgageDaily.com. He also owns and operates CloseNow.com, a real estate portal site.

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