Loan Modification

FHA Suspends More Than 900 Lenders

By Peter G. Miller

In a mass action, the FHA has announced sanctions against more than 1,000 lenders, including some of the largest and best-known financial names in the country. The result will be an environment where FHA loan borrowers will have fewer choices (because more than 900 lenders can no longer offer FHA financing) and more rigorous loan applications (because remaining lenders will want to make sure that every requirement has been met and verified).

“Lenders should know by now that FHA will not tolerate fraudulent or predatory lending practices,” said FHA Commissioner David Stevens. “Any FHA-approved lender that does business with us must follow our standards. If we determine that our partners are not playing by the rules, we will take action — it’s that simple.”

In a 15-page announcement in the Federal Register, FHA’s Mortgagee Review Board (MRB) included large numbers of fines and suspensions.

The FHA says its “Mortgagee Review Board sanctions FHA-approved lenders for violations of the agency’s program requirements. For serious violations, the Board can withdraw a lender’s FHA approval so that the lender cannot participate in FHA programs. In less serious cases, the Board enters into settlement agreements with lenders to bring them into compliance. The Board can also impose civil money penalties, probation, suspension, and issue letters of reprimand.”

Without admitting fault or liability, 32 lenders agreed to settle allegations against them, including CitiMortgage (which paid a fine of $700,000), Equitable Trust Mortgage Corporation, Baltimore, MD ($277,500), Financial Mortgage USA, Inc. Honolulu, HI ($97,500), Franklin First Financial LTD, Melville, NY ($413,500), Ideal Mortgage Bankers, Ltd. d/b/a Lend America, Melville, NY ($512,500), PrimeWest Mortgage Corporation, Lubbock, TX ($168,500), ProMortgage, Incorporated, Claremore, OK ($124,000) and Premium Capital Funding LLC d/b/a TopDot Mortgage, Jericho, NY ($674,000).

The Mortgagee Review Board also withdrew FHA approval from 905 lenders. The Board said it acted because the lenders were not in compliance with the Department?s annual recertification requirements. The suspensions will last for a year, meaning that such lenders cannot offer FHA loan products for the next 12 months, products which today are a big part of the mortgage marketplace.

Lastly, the Mortgagee Review Board agreed to allow 147 lenders to continue in the FHA program. These lenders had failed to renew their FHA certifications in time. The matter was settled with each lender having the opportunity to pay $3,000 and without admitting fault or liability.

The New Era

What makes the FHA announcement interesting are the numbers. The Mortgagee Review Board must have gone through tons of paperwork, or at least a lot of electrons, to find the various allegations it uncovered. This year alone, says the FHA, “the MRB took nearly 1,500 administrative sanctions against lenders, including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.”

And the year isn’t over.

Full post as published by FHA Mortgage Guide on July 27, 2010 (boomark / email).