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3 FHA Mortgagees Pay HUD $1.7 Million

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Three Federal Housing Administration mortgagees have agreed to pay more than $1.7 million in penalties and reimbursements over alleged violations.

In a public filing Monday, the U.S. Department of Housing and Urban Development disclosed that WR Starkey Mortgage LLP was hit with a $223,000 civil money penalty on May 20. The Plano, Texas-based lender also agreed to indemnify HUD on 32 mortgages and reimburse HUD for 11 of the loans that reportedly resulted in $756,407 in claims.

“WR Starkey had numerous loan origination and underwriting deficiencies,” the filing stated.

HUD said that the company failed to remit up-front mortgage insurance premiums on a timely basis, allowed a Credit Watch terminated branch to originate loans and failed to ensure that loans met property eligibility requirements. It also allegedly failed to comply with property flipping guidelines and neglected to ensure that construction-to-permanent loan requirements were met.

Starkey President and Chief Executive Officer John L. Aspinwall told Mortgage Daily in a telephone interview that all that has been alleged by HUD is correct, and he has taken steps to “clean house.”

In August, North Carolina’s attorney general announced a $4.5 million settlement with Starkey over allegations that it helped Phoenix Housing Group of Greensboro, N.C., sell manufactured homes at inflated prices. As part of that settlement, founder and then-CEO Bill Starkey Jr. agreed to resign.

At issue with both HUD and North Carolina were manufactured housing loans originated in 2007 and 2008. Aspinwall, who replaced Bill Starkey, noted that the company has since abandoned such lending entirely.

“I changed the administration here 100 percent,” Aspinwall added. “We have stepped up and done the right thing across the board and gone as far as changing the leadership.”

Bank of America Corp. subsidiary Countrywide Home Loans Inc. entered a settlement with HUD on June 17. That deal included a $141,500 civil money penalty and buy downs of $93,263. In addition, Countrywide surrendered its FHA approval.

HUD said that BofA will maintain its FHA approval and honor the indemnifications.

The agreement resulted from Countrywide’s failure to provide complete origination files.

Over in Birmingham, Mich., Birmingham Bancorp Mortgage Corp. lost its FHA approval, also on June 17, for five years. The company allegedly failed to honor the terms of six executed indemnification agreements after it failed to remit payment.

But HUD withdrew the termination on July 2 and accepted a settlement offer from Birmingham of $815,913 — including $770,913 in indemnification on 16 loans and a $45,000 civil money penalty.

The agreements with Starkey, Countrywide and Birmingham were among hundreds of mortgagee actions disclosed today by HUD.

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