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FHA Reports Settlements with Several Mortgagees

Hundreds of thousands of dollars in civil money penalties issued

Feb. 24, 2012

By staff

A government filing Friday outlined actions taken against approved Federal Housing Administration mortgagees that included hundreds of thousands of dollars in penalties, indemnification on FHA-insured loans and even the loss of FHA approval. Many of the recent settlements involved deficiencies in remitting mortgage insurance premiums.

The Mortgagee Review Board's administrative actions were disclosed Friday by the Department of Housing and Urban Development.

HUD is required to release the cause and description of administrative mortgagee actions under the National Housing Act.

A $215,000 settlement was reached in June 2011 with Branch Bank and Trust Co. The agreement calls for BB&T and subsidiary Liberty Mortgage Corp. to remit M.I. premiums and late fees owed. Liberty allegedly failed to make timely M.I. premium remittances. It also is accused of waiting more than 15 days to notify HUD of the termination of M.I. contracts.

Similar allegations led to a $256,000 settlement between HUD and PHH Mortgage Corp.

AmericanHomeKey Inc. agreed to pay a $138,900 civil money penalty over allegations that the Dallas-based firm failed to remit up-front M.I. premiums on time for FHA loans.

Other mortgagees penalized for late M.I. remittance include Cornerstone Mortgage Co., which was hit with a $7,500 civil money penalty; Gateway Funding Diversified Mortgage Services LP, which is required to pay a $16,950 civil money penalty; and James B. Nutter & Co., which faced a $19,000 penalty.

An April 2011 settlement between HUD and Universal Lending Corp. will cost the Denver-based mortgagee $45,500 in civil money penalties and $496,728 in reimbursement for claims already paid by HUD. In addition, Universal agreed to indemnify HUD on six FHA loans.

"Universal improperly entered
incorrect information as 'cash reserves' into HUD's automated underwriting system in order to receive approvals for seven loans; failed to adequately document the stability of borrowers' employment or income and failed to adequately document other income used to qualify borrowers; failed to consider mortgage payment debt and liabilities when underwriting and approving FHA-insured loans; failed to adequately document the source of gift funds for one loan; and failed to obtain confirmation concerning cash saved at home with regard to two other loans," the filing stated.

HUD said that First Guaranty Mortgage Corp. agreed in an April 2011 settlement to indemnify HUD on 21 loans, including existing losses of $91,008, and refund $17,702 in improper fees. The settlement also includes a $127,500 settlement. First Guaranty, which is based in McLean, Va., allegedly approved 30 FHA-insured mortgages for unqualified borrowers.

The federal housing agency claims that First Guaranty approved loans to borrowers with excessive debt-to-income ratios, didn't adequately document gift funds and permitted loan correspondents to be improperly compensated with mortgage broker fees.

An April 2011 settlement between HUD and First American Mortgage Trust requires $9.368 in refunds of impermissible fees, payment of a $72,500 civil money penalty and indemnification on five FHA loans. The Brookline, Mass.-based firm allegedly failed to maintain an adequate quality-control program from 2006 through 2009. In addition to other operational deficiencies, First American failed to provide adequate documentation to support excessive interest rates and discount points.

Questionable quality controls were also cited in a $50,000 settlement with Priority Bank in Ozark, Ark. Improperly paid compensation was also behind the agreement.

The identity of the president of ResMac Inc. was allegedly misrepresented on its January 2009 application for FHA approval, leading to a $50,000 settlement between HUD and the Sunrise, Fla.-based company. ResMac was also required to submit restated financial statements for the fiscal year ended Dec. 31, 2009.

"Misrepresentative advertisements" were among numerous violations cited for a $23,500 settlement between HUD and MCS Mortgage Bankers Inc. in July 2011. The agreement also calls for indemnification on three FHA-insured mortgages.

A $12,500 civil money penalty was issued against Allen Mortgage LC on Sept. 14, 2011, as part of a settlement. While Allen Mortgage admitted nothing, HUD alleges that it wasn't notified that the mortgagee had entered a consent agreement with the state of Washington that required an $11,000 fine for unlicensed originations. The company is also accused of hiding a $1,500 Arkansas order.

Several alleged violations in a real estate transaction led to a March 2011 settlement between Peoples Home Equity Inc. and HUD. In addition to a $7,500 civil money penalty, the Brentwood, Tenn.-based firm will need to pay $2,868 to buy down the principal balance on one loan and indemnify HUD for five years.

HUD issued a $2,500 civil money penalty against Action Mortgage Corp. in June 2010 because the Cranston, R.I., firm improperly used HUD's seal on its website. But when Action Mortgage failed to remit the full settlement amount, its FHA approval was permanently withdrawn on June 15, 2011.

Six mortgagees that missed the annual recertification deadline but subsequently cured the deficiency each agreed to pay $3,500 in civil money penalties without admitting fault or liability. The mortgagees were American Homestar Mortgage LLC in League City, Texas; Merrill Lynch Mortgage Lending Inc. in New York; Southpoint Financial Services Inc. in Alpharetta, Ga.; United Bank in Charleston, W.V.; Wendover Financial Services Corp. in Chesterbrook, Pa.; and World Alliance Financial Corp. in Melville, N.Y.

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