Lend America has lost its approval to make loans insured by the Federal Housing Administration.
In an announcement today, the U.S. Department of Housing and Urban Development said FHA approval was withdrawn for Ideal Mortgage Bankers, which does business as Lend America and Lending Key.
“The action is effective immediately and prevents Ideal from originating and underwriting new FHA-insured mortgages or from participating in the FHA single family insurance program,” the statement said.
HUD’s Mortgagee Review Board imposed a $512,500 civil money penalty against the Melville, N.Y.-based firm in connection with two notices of violation issued last month. The penalties were the result of “numerous violations of FHA origination and underwriting requirements, including failing to document borrowers’ income and creditworthiness, and for submitting false certifications to the department.”
FHA alleges that Lend America approved unqualified loans and failed to document source of funds. In addition, the company allegedly omitted liabilities from an underwriting analysis without supporting documentation, approved loans that exceeded HUD ratios without adequate compensating factors and exceeded HUD’s maximum in calculating insurable loan amounts.
The company is also accused of failing to follow HUD guidelines when processing an employee loan. It additionally closed a loan with an excessive mortgage broker fee and submitted false certifications tied to its yearly verification report.
Lend America has 30 days to challenge the withdrawal action and the civil money penalties before an administrative law judge, the statement said.
“The company is surprised and disappointed by today’s action by the U.S. Department of Housing and Urban Development’s Mortgagee Review Board,” Lend America said in a statement. “The company is currently reviewing all possible options and remedies in response to this action, and will respond shortly once a decision has been reached.”
The government originally sued Lend America in U.S. District Court in Central Islip, N.Y., during October. But the company announced one day later that “the court denied the government’s request for an order prohibiting Lend America from originating FHA insured loans.”
FHA’s action today triggered a default in the Government National Mortgage Association’s program, Ginnie Mae Executive Vice President Mary Kinney said in the announcement. Lend America can no longer issue Ginnie Mae securities.
“The evidence in this case points to a disturbing pattern of senior officials and underwriters, either not knowing what they were doing, or not caring,” FHA Commissioner David Stevens said in the statement.
HUD requested that the U.S. Attorney’s Office for the Eastern District of New York pursue a civil fraud injunction against Lend America and one of its senior managers.
That senior manager is likely Michael Ashley, Lend America’s executive vice president and chief business strategist. A complaint filed in October by the government alleged Ashley was the mastermind behind the scheme to defraud HUD. It also indicated that he previously admitted to mortgage fraud while operating his mortgage brokerage, Shares Capital, in 1989.
United States of America v. Ideal Mortgage Bankers, LTD et al.
2:09-cv-04484-JFB -WDW, Oct. 20, 2009 (U.S. District Court for the Eastern District of New York).