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15 FHA Firms Face Subpoenas

HUD OIG targets poorly performing mortgagees

Jan. 12, 2010

By Mortgage Daily staff

Subpoenas were issued against 15 Federal Housing Administration mortgagees over the poor performance of their originations.

The actions were announced today by U.S. Department of Housing and Urban Development Inspector General Kenneth M. Donohue and FHA Commissioner David H. Stevens. The actions were prompted by an alarming number of claims on loans originated by "a number of poor performing companies."

The subpoenas, which were served to the companies' corporate offices, demand documents and data tied to loans for which claims were paid from the FHA mortgage insurance fund.

Donohue noted that the initiative is only at the investigation stage, no evidence of wrongdoing has emerged and no accusations are being made yet.

"But we will aggressively pursue indicators of fraud," Donohue stated. "We are members of the president's Financial Fraud Enforcement Task Force, and today's activities reflect our commitment to seeking information on red flags that may arise from data analysis."

The approach is a new one for the government, which had been focusing on branch offices. Now the inspector is going after corporate offices.

The companies under investigation are:
  • 1st Advantage Mortgage, Lombard, Ill.;
  • Alacrity Financial Services LLC, Southlake, Texas;
  • Alethes LLC, Lakeway, Texas;
  • American Sterling Bank, Independence, Mo.;
  • Americare Investment Group Inc., Arlington, Texas;
  • Assurity Financial Services LLC, Englewood, Colo.;
  • Birmingham Bancorp Mortgage Corp., West Bloomfield, Mich.;
  • D and R Mortgage Corp., Farmington, Mich.;
  • Dell Franklin Financial LLC, Columbia, Md.;
  • First Tennessee Bank, N.A., Memphis, Tenn.;
  • Mac-Clair Mortgage Corp., Flint, Mich.;
  • Pine State Mortgage Corp., Atlanta;
  • Security Atlantic Mortgage Co., Edison, N.J.;
  • Sterling National Mortgage Company Inc., Great Neck, N.Y.; and
  • Webster Bank, Cheshire, Conn.

"The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage," Stevens said in the statement. "These are key indicators of problems at the origination or underwriting stages."

The Mortgage Bankers Association issued a statement indicating its pleasure with HUD's commitment to address mortgage fraud on FHA loans. But it also called for due process before judging the firms' actions.

Stevens added that additional FHA changes are expected to be announced later this month.

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