Lend America has scored a victory in a lawsuit filed by the government — which is trying to revoke the company’s Federal Housing Administration approval. The favorable ruling followed a filing by the company highlighting a massive operational overhaul that was implemented this year.
The case was filed yesterday by the U.S. government in U.S. District Court for the Eastern District of New York.
Lend America is accused of abusing its authority under the U.S. Department of Housing and Urban Development’s Direct Endorsement Program. It allegedly manipulated loan files and falsely certified loans met FHAÂ guidelines.
“As a result of defendants’ fraudulent schemes, many of Lend America’s borrower have missed mortgage payments and defaulted on their mortgage loans,” the complaint says. “Many of these homeonwers have lost or are in the process of losing their homes to foreclosure.”
Lend America’s executive vice president and chief business strategist, Michael Ashley — who is the alleged mastermind behind the scheme to defraud HUD — previously admitted to mortgage fraud while operating his mortgage brokerage, Shares Capital, in 1989, according to the complaint.
In a declaration filed yesterday, Lend America Chief Performance Officer Scott Rasmussen explained that the firm, which has been approved to originate FHA loans since 1988, has made a number of changes to its organizational structure, business practices and support functions since the end of last year. It has digitized the entire origination process, enabling better control and accountability and blocking unauthorized file access. A new phone system properly routes calls to originators who are actually licensed in the state the call originated from.
Other measures described in the document include the monitoring of credit report orders; the implementation of Fraud Guard, a mortgage fraud prevention system; and the use of automated income verification from the Internal Revenue Service. The Melville, N.Y.-based lender also implemented Compliance Ease, appraisal management company services and a new sales department and management structure.
In addition, Lend America prohibited the use of personal wireless phones in the office and restricted loan officer access to production facilities. Team leaders are now required to monitor the phone calls of loan originators, who have been moved away from underwriters and processors.
The filing was an apparent success.
“Lend America is pleased to announce that today the court denied the government’s request for an order prohibiting Lend America from originating FHA insured loans,” the company said today in a statement. “We are obviously pleased with the court’s decision.
“We look forward to continuing our partnership with HUD and our mission of providing affordable financing for those borrowers in need.”
United States of America v. Ideal Mortgage Bankers, LTD et al.
2:09-cv-04484-JFB -WDW, Oct. 20, 2009Â (U.S. District Court for the Eastern District of New York).
Related:
Possible FHAÂ Suspension for Lend America
The government is suing Lend America to stop it from making loans that are insured by the Federal Housing Administration. But the company, which recently announced the launch of new FHA wholesale and correspondent lending channels, doesn’t expect the same fate as Taylor, Bean & Whitaker Mortgage Corp.
