Less than a week after the Federal Housing Administration (FHA) announced it would pursue legislative authority to increase its lender enforcement options, the agency went on a tear Monday, with its Mortgagee Review Board (MRB) taking action against several approved lenders. Four lenders had their approval withdrawn, a fifth lender was suspended and two lenders were placed on six months' probation.
Premium Capital Funding LLC (doing business as TopDot Mortgage), Strategic Mortgage Corp. (Strategic), ProMortgage Inc. and Americare Investment Group Inc. (d/b/a Premier Capital Lending) have had approvals revoked, while Burr Ridge, Ill.-based Home Mortgage Inc. (HMI) has been suspended. "Misleading advertising practices" additionally caused the MRB to suspend both Action Mortgage Corp., Cranston, R.I., and Cooper and Shein LLC (d/b/a Great Oak Lending Partners), Timonium, Md.
Ginnie Mae has also terminated TopDot as an issuer in its mortgage-backed securities (MBS) program, ending TopDot's ability to service Ginnie Mae securities. Servicing of TopDot's $181.2 million dollar Ginnie Mae portfolio will be transferred to LoanCare Servicing Center Inc.
"FHA takes its oversight role very seriously and will move swiftly and decisively to protect borrowers from unscrupulous lenders," says FHA Commissioner David Stevens. "Any lender who refuses to comply with FHA requirements will simply no longer enjoy the privilege of participating in FHA programs."
Two weeks ago, Stevens and Department of Housing and Urban Development (HUD) Inspector General Kenneth M. Donohue announced a probe into 15 FHA lenders with significant claim rates.
According to the MRB and Ginnie Mae, TopDot committed "numerous and egregious violations," including failure to document borrowers' income and to evaluate borrowers' creditworthiness, as well as approving loans with "grossly excessive" debt-to-income ratios without justification.
"This lender demonstrated a pattern of utter disregard for how we do business and its behavior not only put the FHA insurance fund at risk, but placed their own customers at greater risk of foreclosure," Steven says, adding that FHA approval is a "privilege that we entrust to the most responsible lenders."
Strategic failed to comply with employment requirements, charged borrowers impermissible or excessive fees, failed to disclose all fees on the Good Faith Estimates, and submitted a false certification to HUD in connection with an application for FHA insurance, the MRB says.
The MRB lodged several complaints against ProMortgage, saying the company, among other failings, did not adopt and maintain a quality control plan, engaged in a prohibited branch arrangement and allowed borrowers to provide employment verification directly to the lender – a practice the FHA says can create an opportunity for manipulation of documents.
Americare failed to pay a penalty levied by the MRB in October 2009. A settlement between the MRB and Americare resulted in a six-month probation and a monetary penalty of $124,000. Americare has failed to make a single monthly payment, the FHA says.
HMI retained its part owner and CEO despite his indictment and subsequent guilty plea for bank fraud, the FHA says. Additionally, HMI failed to comply with FHA's annual recertification requirements.
All of the lenders may appeal the MRB's sanctions, although the filing of an appeal does not delay any of the announced actions.
SOURCE: Federal Housing Administration