A former mortgage net branching giant has lost its legal battle with the Department of Housing and Urban Development.
It all started in 2011 when Allied Home Mortgage Corp. was suspended an approved Federal Housing Administration mortgagee.
Among the reasons cited by HUD for the suspensions were loan originations by branches that were not FHA-approved, non-compliance with quality control requirements and employment of a principal, officer and director who was suspended.
Concurrent with the suspension, HUD filed a federal lawsuit against Houston-based Allied alleging fraud. HUD claims that the default rate on FHA-insured loans originated by Allied in 2006 and 2007 was 55 percent.
Allied filed a motion for a preliminary injunction preventing its suspension, and the motion was granted — though not until after Allied suspended originations and was unable to pay employees.
Allied also filed its own lawsuit against HUD in U.S. District Court for the Southern District of Texas seeking to have the suspension set aside.
Allied argued that it was being held liable for the actions of its predecessor company, Allied Home Mortgage Capital.
Allied filed a motion for a summary judgment, while HUD filed a motion to dismiss the lawsuit.
On Tuesday, U.S. District Judge Gray H. Miller granted HUD’s motion to dismiss. The claims were dismissed with prejudice.
“After consideration of the arguments and the record, the court finds that HUD’s suspensions of James Hodge and Allied Corp were not arbitrary and capricious,” the decision stated. “Plaintiffs have also failed to make a case for any due process violation.
“Therefore, plaintiffs’ motion for summary judgment (Dkt. 89) is denied and defendants’ motion for summary judgment (Dkt. 91) is granted.”
