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Possible FHA Suspension for Lend America

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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.

U.S. Attorney Benton J. Campbell filed the lawsuit in U.S. District Court in Central Islip, N.Y., against Ideal Mortgage Bankers Ltd., which does business as Lend America, according to a statement from the U.S. Department of Justice today.

The government seeks to revoke Lend America’s FHA lending approval. In addition, the complaint seeks relief against Lend America’s executive vice president and chief business strategist, Michael Ashley.

Lend America participates in a special program with the U.S. Department of Housing and Urban Development that enables it to make FHA loans on defaulted loans, the statement said. The company is required to determine that these borrowers are eligible under HUD’s lending standards.

Lend America announced in May that it was approved by HUD to underwrite, close and insure HOPE For Homeowners loan transactions without prior HUD review.

The government claims Lend America falsely certified that borrowers met HUD’s guidelines on $14 million in mortgages.

“Those who would seek to game the system should be on notice — play by the rules or you will face the consequences,” FHA Commissioner David H. Stevens said in the government’s announcement.

Stevens’ statement was reminiscent of statements made by the housing agency when it suspended FHA approval for Taylor, Bean and Whitaker Mortgage Corp. in early August over alleged misrepresentation and fraudulent transactions. A few days later, Taylor Bean suspended business, while later that month — the company filed for bankruptcy.

But Lend America is hoping it won’t go down that path.

“The company was taken by surprise, expects to continue in business and will respond more completely once all allegations are reviewed,” Lend America said in a statement today to

The Melville, N.Y.-based firm announced last week the launch of a new FHA correspondent channel, while an FHA wholesale channel was announced two weeks earlier.

In addition to third-party originators, the loss of Lend America’s FHA approval would be a blow to its nearly 700 employees — many of whom were hired following the collapse of American Home Mortgage Investment Corp. in August 2007. Last year, the company leased up 60,000 square feet of office space formerly occupied by American Home.

In April, HUD reported that the Lend America lost its FHA approval. But Lend America subsequently told that the action was just six months’ probation and a $6,500 penalty for a mailer it sent.

As of March 31, Lend America reported that its servicing assets were more than $0.5 billion and would likely exceed $2.0 billion by Dec 31. The government did not address the servicing portfolio.

Lend America’s counsel will face off with assistant U.S. attorneys Kevan Cleary, James H. Knapp, Edward K. Newman and John Vagelatos.

“Fraudulent lending practices that compromise the integrity of the FHA mortgage insurance program and contribute to the alarming increase in loan defaults and housing foreclosures will not be tolerated,” Campbell, the U.S. attorney, said in the statement.

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