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FHA Claims Branches Not Legit

2 firms lose FHA approval, 2 others fined $0.5 million

April 1, 2010

By staff

The government withdrew Federal Housing Administration approval for a mortgagee that it claims originated FHA loans from branches that weren't legitimate using loan officers who were not employees. Another firm lost its approval because of fraud previously committed by its owner. Two other mortgagees were fined nearly $500,000.

RSA Financial Inc. permanently lost its Federal Housing Administration approval, a notice today said. As a result, the Atlanta-based company is prevented from originating and underwriting new FHA-insured mortgages. RSA is also banned from participating in the FHA single family insurance program and must pay a $15,000 civil penalty.

At the time it submitted its lender application to FHA for approval, RSA allegedly misled the U.S. Department of Housing and Urban Development about being licensed with the Georgia Department of Banking and Finance, though it was not approved because of its owner Ramsey Suphi Agan's criminal background. FHA also claims the company submitted false or misleading information about Agan's criminal conviction and sanction history.

In 1982, Agan pled guilty to two counts of knowingly submitting false statements for the purposes of influencing the actions of a federally insured bank -- leading to a two-year prison sentence and FHA's suspension of his company, Adana Mortgage Bankers, and his debarment for five years. Then, in 1988, he was convicted of bribery, leading to an indefinite FHA debarment.

FHA additionally reported that 1st Alliance Mortgage LLC lost its FHA approval. A $267,900 civil penalty was imposed against the Houston-based firm, which the housing agency claims used independent contractors to originate 708 loans from branch offices that were not true branches. The company then falsely certified that the contractors were its full-time employees.

1st Alliance also failed to implement a quality-control plan, failed to report employee compensation to the Internal Revenue Service on a W-2 and charged borrowers unallowable, excessive or duplicative loan processing and origination fees. The company additionally failed to properly ensure that fees paid outside of closing were listed on HUD-1 Settlement Statements.

In Melville, N.Y., Franklin First Financial Ltd. agreed to pay a $413,500 civil penalty and indemnify HUD for any losses on 31 FHA-insured mortgages. The indemnification will last for five years. Franklin First will also reimburse 78 borrowers for duplicate appraisal costs incurred in its efforts to sell the loans on the secondary market.

A similar agreement was reached with Paramount Bond and Mortgage Co. Inc. -- which will pay a $68,500 civil penalty, indemnify HUD for losses on seven loans and reimburse FHA for $146,397 in insurance claims already paid on two loans.

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