Mortgage firms that service government-insured mortgages face a number of possible actions if their foreclosure affidavits weren’t prepared in accordance with government requirements.
Sources with close ties to the Federal Housing Administration are saying that the agency is likely to soon begin taking steps to address faulty foreclosures of FHA-insured mortgages as a result of the recent foreclosure furor. Significant action is expected against FHA-approved mortgagees and mortgage servicers who did not follow FHA’s prescribed loss mitigation requirements and foreclosure procedures.
The U.S. Department of Housing and Urban Development has already taken a more vigorous enforcement approach over the last several months and has apparently been galvanized into action on the foreclosure front by the wave of publicity about improper foreclosure procedures. If it intends to come down heavily on FHA-approved mortgagees/servicers, it has the means to do so.
HUD’s Mortgagee Review Board will likely be the principal instrument of any assault on faulty foreclosures of FHA-insured loans. The board has been much more active under this administration and now will probably wade into the foreclosure crisis. It can impose probation, suspension or termination (withdrawal) of FHA approval as sanctions on erring mortgagees and servicers.
In addition, it has the authority, which it frequently uses, to collect civil money penalties from mortgagees/servicers for violations of HUD regulations and guidance. Presumably, HUD could take even more serious action outside the MRB’s scope if it discovers major misconduct, such as fraudulent filings.
Mortgagees who service FHA-approved mortgages should be concerned about the likelihood of FHA action. Loss mitigation and foreclosure procedures and case files of foreclosures should be carefully reviewed.