Mortgage Daily

Published On: June 30, 2006
HUD Punishes 17 FHA Lenders

ABN AMRO, Flagstar among penalized

June 30, 2006


photo of Coco Salazar
Over the past year, the Department of Housing and Urban Development enforced actions for alleged FHA-lending violations against 17 mortgage companies, including ABM AMRO Mortgage Group Inc. and Flagstar Bank.

HUD published a June 16 notice outlining administrative actions taken by its Mortgagee Review Board from March 14, 2005 to May 16, 2006.

Companies with settlement agreements involving failure to ensure employees worked exclusively for them included AMortgage Link LLC which agreed to pay an administrative of $35,000, Columbia Funding Group Inc. which agreed to pay a $20,000 fine, First Rate Capital Corp. with an agreement to pay $109,500, and U.S. Mortgage Finance Corp. which agreed to $72,000 administrative payment and to indemnify HUD for any losses incurred on five loans.

Apreva Inc. and its president in March agreed to an indefinite voluntary withdrawal of its FHA-approval until it paid or otherwise indemnified HUD for its losses on 34 mortgages; pay a $316,000 civil money penalty and that the president would not have a controlling interest in any other FHA-approved mortgage company during the time Apreva’s withdrawal was in effect. The Washington-based company reportedly failed to provide adequate compensating factors to justify the approval of mortgages with ratios exceeding HUD/FHA standards, and among other things, did not adequately document employment income and verify the source of funds used for the downpayment and/or closing costs.

Other companies whose settlements agreements resolved issues connected to failure to verify sources of funds for downpayment were George Mason Mortgage LLC with a $45,000 fine, Greenwich Home Mortgage Corp. with a $58,000 fine, Home Consultants Inc. with a $81,500 administrative payment agreement, and Mortgage Access Corp. with an agreement to pay $53,500.

Budget Mortgage Bankers agreed to indemnify HUD for any losses incurred on 15 FHA loans and pay a $238,500 fine for approving more than one FHA-insured loan for borrowers without adequate justification, making false certifications, failing to ensure loan amounts stayed within maximum loan-to-value limits and underwriting and using an appraiser not in accordance with HUD.

Meanwhile, Discover Mortgage Co. agreed to pay $70,000 after HUD said the company did not have a Quality Control Plan in place in 2002 and 2003, and originating FHA loans in branch offices with prohibited branch arrangements, as well as for failing to retain completer loan origination files.

Another company whose actions by HUD involved failure to maintain and implement a compliant quality control plan was First Florida State Mortgage Corp., which agreed to a $8,500 administrative payment, and Liberty Mortgage Brokers, which agreed to a $10,000 administrative payment and voluntarily surrendered and agreed not to reapply for its FHA approval. Liberty reportedly also participated in a scheme with other lenders to violate HUD conflict of interest regulations, failed to file annual reports of loan application activity and did not maintain complete loan files.

Meanwhile, Moreland Financial Corp. failed to finalize a settlement previously considered by HUD’s board in which the company was allowed to pay a $22,000 administrative fine in installment payments and was instead later ordered to pay it in one lump sum.

HUD also said it suspended the FHA approval of Mid-America Mortgage Corp. in March 2005, pending resolution of an indictment against the company president involving conspiracy with others to falsify information included in loan applications for the purpose of obtaining FHA insurance on the mortgages.

Flagstar Bank signed a settlement agreement in January to pay $182,000 to resolve allegations that it violated the Fair Housing Act from May 1, 2001 to January 31, 2002 by charging non-minority borrowers higher fees than minority borrowers.

Flagstar didn’t respond to’s request for a statement.

In December, ABN AMRO agreed to pay the government $16.85 million to settle action HUD took against the company for issuing false certifications to HUD on 26,775 loans insured by the Federal Housing Administration, according to the notice.

ABN AMRO said the settlement was a “resolution of a matter the company discovered, investigated and self-reported to the government in 2003.”

In addition to administering insurance certifications on the 20,000-plus FHA loans it originated during 2000 to 2003, ABN AMRO also chose not to submit insurance claims on 783 defaulted loans that were originated in that period, the Michigan-based lender said in a written statement.

However, “there was no harm or loss to borrowers or business partners,” ABN AMRO said. “All loans were underwritten by HUD-authorized underwriters; however, the final certification process was not completed properly. A recent analysis of the repayment of the approximate 28,000 loans indicates they are performing consistently with unaffected loans originated by the company during the same time period and comparably with the average repayment performance reported by other FHA lenders.

“Also, because the company has corrected past conduct through improved quality controls and procedures, the settlement involves no injunctive relief, and sufficient reserves were previously set aside.”


Bad Loans Dumped Into FHA
Two of Ohio’s largest lenders have been accused by the federal government of improperly steering nearly $300 million in delinquent mortgages into a government-backed insurance program.

Bank Settles With HUD
An Ohio-based lender has settled with the Department of Housing and Urban Development charges it denied mortgage financing to an African-American woman because of her race.

Lenders Lose FHA Approval
Five mortgage lenders, including a branch of the largest U.S. mortgage broker, have lost their approval to originate FHA-insured loans.

ABN AMRO Settles FHA Fraud Charges
ABN AMRO Mortgage Group has agreed to the largest FHA settlement ever.

Coco Salazar is an assistant editor and staff writer for [email protected]

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