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Big Lenders Face HUD Actions

Recent FHA mortgagee actions

Sept. 10, 2012

By staff

More than two dozen Federal Housing Administration mortgagees recently lost FHA approval or were hit with some other administrative action. Among the companies facing actions were Fifth Third Bank; MetLife Bank, N.A; PHH Home Loans LLC; and Wells Fargo Bank, N.A. Alleged violations include improper handling of foreclosed properties, bad underwriting and false advertising. Several mortgagees were cited for failing to disclose fines from Pennsylvania's banking department.

The Department of Housing and Urban Development is required by section 202(c)(5) of the National Housing Act to disclose the cause and description of administrative actions taken by HUD's Mortgagee Review Board.

The actions included the loss of FHA approval for four lenders, settlements with 15 mortgagees and the withdrawal of approval for six companies.

Among the actions was a December 2011 letter of reprimand to Wells Fargo Bank, N.A., for failing to comply with property preservation and protection requirements on two FHA-insured real-estate-owned assets.

HUD reached a $700,000 settlement with Fifth Third Bank on April 27. The Cincinnati-based company allegedly failed to remit mortgage insurance premiums on time. It also was slow in notifying HUD of the termination, transfer or sale of mortgage insurance contracts.

PHH Home Loans LLC agreed to a $14,500 settlement with HUD over allegations that the Mount Laurel, N.J.-based company failed to advise HUD of a $50,000 fine paid to the Illinois Department of Financial and Professional Regulation and an $11,750 fine paid to the Pennsylvania Department of Banking. PHH also allegedly filed a false certification with HUD.

HUD reached a $41,250 settlement with MetLife Bank, N.A., on Dec. 12, 2011. While MetLife didn't admit to doing anything wrong, HUD alleges that it approved nearly a dozen loans without identifying irregularities and resolving discrepancies and conflicting loan file information. It also failed to adequately document loan files, didn't ensure documents weren't handled by interested third parties and approved a loan for a borrower with an outstanding judgment. HUD also claims MetLife approved a loan for too much because it failed to consider seller inducements.

These four mortgagees lost FHA approval altogether.

Date Mortgagee Location Reasons
Nov. 30, 2011 Euro Mortgage Bankers Inc. Melville, N.Y. Used falsified or conflicting information on FHA loans; failed to ensure loan applications were taken and processed by authorized employees; neglected to prevent interested third parties from handling documents; was deficient in underwriting; and failed to submit audited financial statements and reports on time.
Feb. 3, 2012 Master Mortgage Corp. Bayamon, P.R. Failed to submit audited financials on time; failed to notify HUD of cease-and-desist order.
Nov. 30, 2011 Union Federal Mortgage Corp. Nanuet, N.Y. Failed to notify HUD that license voluntarily surrendered to N.Y. State Banking Department.
Nov. 8, 2011 Wall Street Financial Corp. Fairfield, N.J. 1-year withdrawal for failing to submit audited financials on time and failing to pay and submit annual certification.

The following mortgagees entered a settlement with HUD.

Date Mortgagee Location Civil Money Penalty Amount Reason
Feb. 23, 2011 Clarion Mortgage Capital Inc. Greenwood Village, Colo. $45,000 Failed to comply with HUD quality control requirements; violated mortgagee staffing and employee requirements; charged unallowable fees.
Feb. 3, 2012 E Mortgage Management LLC Haddon Township, N.J. $14,500 Failed to notify HUD of fine paid to Pa. Department of Banking; submitted false certification.
Oct. 4, 2011 Franklin American Mortgage Co. Franklin, Tenn. $14,500 Failed to notify HUD of fine paid to Pa. Department of Banking; submitted false certification.
April 3, 2012 HomeState Mortgage Company LLC Anchorage, Alaska $15,000 Reproduced official HUD seal in marketing; disseminated a misrepresentative or misleading advertisement or business solicitation to the public.
Dec. 22, 2011 Reliance First Capital LLC Melville, N.Y. $11,000 Didn't notify HUD of penalty paid to Pa. Department of Banking; submitted false certification.
Oct. 11, 2011 Superior Mortgage Corp. Hammonton, N.J. $10,000 Failed to notify HUD that it had paid a $30,000 fine to Pa. Department of Banking; didn't ensure that only owners or officers submitted the annual certification report; submitted a false certification.
Sep. 20, 2011 Town Square Mortgage & Investments Frisco, Texas $11,000 Submitted false audited financial statements; displayed FHA/HUD logo on Web site when promoting its FHA mortgage services.
March 16, 2012 United Northern Mortgage Bankers LTD Levittown, N.Y. $25,000 Failed to ensure quality control reviews on early payment defaults; used conflicting information; failed to document income.
Nov. 28, 2011 Vanguard Funding LLC Garden City, N.Y. $101,500 Failed to notify HUD within 10 days that it was subject of 2 state enforcement actions prohibiting it from originating loans; permitted non-FHA broker to originate; failed to adequately document files; accepted loan applications from unapproved loan correspondents; didn't review early payment defaults.
Dec. 8, 2011 Virginia Commonwealth Bank Petersburg, Va. $6,750 Failed to remit M.I. premiums on time.

Anchor Funding Corp. settled for $7,500 allegations that it failed to comply with annual recertification requirements within the required time. Freyre Mortgage Corp. settled the same allegations for $3,500.

The following six lenders allegedly failed to meet annual recertification requirements. Their FHA approvals were each withdrawn for one year.

Axiom Mortgage Bankers Corp. Irvine, Calif.
Delta Home and Lending Inc. Sacramento, Calif.
First Home Mortgage Inc. Jonesboro, Ark.
HCL Finance Inc. San Jose, Calif.
Ikon Mortgage Lenders, Inc. Fort Lauderdale, Fla.
Red Rock Mortgage & Lending LLC Oklahoma City

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