The U.S. Department of Housing and Urban Development has terminated the approval of more than 30 mortgagees. Among the terminations were branches of Allied Home Mortgage Capital Corp. and Gateway Funding Diversified Mortgage Services.
HUD reported today that it terminated the lenders’ origination agreements — the contracts that enable the companies to participate in the Federal Housing Administration program. As a result, the mortgagees can no longer originate, approve or close FHA-insured loans.
The terminations are part of HUD’s Credit Watch Termination Initiative.
“HUD’s regulations permit HUD to terminate the agreement with any mortgagee having a default and claim rate for loans endorsed within the preceding 24 months that exceeds 200 percent of the default and claim rate within the geographic area served by a HUD field office, and also exceeds the national default and claim rate,” the housing agency explained.
Loans already approved or closed by the terminated mortgagees can be submitted for endorsement.
After six months, the mortgagee can apply for approval again as long as HUD’s secretary “determines that the underlying causes for termination have been remedied” and as long as it qualifies based on current requirements.
Two branches of Allied Home Mortgage Capital Corp. were among those listed as terminated in today’s filing.
In a phone interview with MortgageDaily.com, Allied Chief Executive Officer James Hodge explained that it was actually a single Maryland branch that was approved to operate in two of HUD’s jurisdictions that was terminated.
Hodge explained that the poor performance of FHA loans originated by the branch was tied to an increase in streamlined refinances there. He said the branch underwrote the loans according to HUD’s guidelines and suggested the termination was unfair.
Allied claims to be “the nation’s largest privately held mortgage banker and broker.”
Also listed was a branch of Gateway Funding Diversified Mortgage Services.
Gateway operates 38 retail branches and was founded in 1994 by former Mortgage Bankers Association Chairman Regina M. Lowrie. It launched Gateway Funding Correspondent in June.
A $2.9 million settlement with Gateway was announced by the Federal Trade Commission in December 2008 over alleged price discrimination with minority borrowers. All but $0.2 million of the $2.9 million judgment, however, was suspended due to Gateway’s inability to pay.
