May 22, 2024

FHA Takes Action Against Rogue FHA Lenders – Numerous Violations Cited

In a HUD press release, it was announced that the FHA’s Mortgagee Review Board (MRB) took action against 240 FHA lenders who violated numerous lending regulations and failed to meet FHA requirements.

Actions taken by the FHA MRB included suspensions, reprimands, probations, money penalties and withdrawal of FHA lending approval.  More than 2,300 administrative actions have been taken against rogue FHA lenders since 2009, including a record number of 1,600 administrative actions in 2010.

It is a certainty that numerous violations of FHA lending regulations have been taking place for years, but it took a mortgage crisis and high default rate on FHA loans for HUD to finally take serious actions.  Many small and inadequately financed lenders were approved as FHA lenders in the past and were not given proper regulatory scrutiny and oversight.  As a result many consumers were taken advantage of and charged excessive fees by unscrupulous lenders and the FHA wound up with mortgages that should not have been approved and subsequently defaulted.

In order to ensure compliance with FHA regulations and eliminate rogue FHA lenders, the FHA recently instituted new rules that require a higher net worth by FHA approved lenders, better oversight of mortgage brokers and stricter approval criteria for new FHA loans.

According to acting FHA Commissioner Carol Galante, “It’s never been more important that lenders doing business with FHA apply our standards to each and every loan they originate and underwrite.  FHA requirements ensure homeowners are put on a path of sustainable homeownership and that ultimately helps stabilize entire neighborhoods and communities.”

A total of 26 FHA lenders faced administrative action that included settlements, civil money penalties and withdrawals or suspension of FHA lending approval.  The most notorious company on the list was Taylor, Bean & Whitaker Mortgage Corp which had been engaged in ongoing mortgage fraud and lending violations for years before finally being closed by regulators.

The 26 lenders mentioned above that the FHA MRB took administrative actions against are listed below:

  1. 1st Continental Mortgage, Ft. Lauderdale, FL
  2. Action Mortgage Corp, Cranston, RI
  3. Alacrity Lending Co, Southlake, TX
  4. Allied Home Mortgage Corp, Houston, TX
  5. Allied Home Mortgage Capital Corp, Houston, TX
  6. Amarillo National Bank, Amarillo, TX
  7. American Mortgage Group, Anthem, AZ
  8. Bernard Mortgage Corp, Chicago, IL
  9. Cambridge Home Capital, LLC, Great Neck, NY
  10. Catalyst Lending, Inc, Greenwood Village, CO
  11. Community Lender, INC, Boise, ID
  12. DAS Acquisition, LLC, St Louis, MO
  13. Equitable Trust Mortgage Corp, Baltimore, MD
  14. First Ohio Banc and Lending, INC, Independence, MO
  15. Golden First Mortgage Corp, Great Neck, NY
  16. Guild Mortgage Co, San Diego, CA
  17. Hartland Mortgage Centers, INC, Woodbridge, IL
  18. KRK Financial Services, INC, Chicago, IL
  19. Mortgage Line Financial Corp, Woodbury, NY
  20. New England Regional Mortgage Corp, Salem, NH
  21. RSA Financial, INC, Atlanta, GA
  22. Somerset Investors Corp, Melville, NY
  23. Taylor, Bean & Whitaker Mortgage Corp, Ocala, FL
  24. Vanderbilt Mortgage and Finance, INC, Maryville, TN
  25. WCS Lending, LLC, Boca Raton, FL
  26. Windsor Capital Mortgage Corp, San Diego, CA

The serious lending violations committed by the 26 FHA lenders listed above, according to the FHA, included:

  • False certifications and statements
  • Improperly verifying source of downpayment monies
  • Approving mortgages with insufficient borrower income and/or failure to properly document income
  • Failure to include all liabilities on borrower’s loan applications
  • Approving mortgage loans with credit score below the minimum requirements
  • Lack of quality control plans
  • Not turning over mortgage insurance premium payments to HUD
  • Using inflated appraisal values
  • Charging borrowers excessive and duplicative fees
  • Failure to disclose all closing costs to borrowers

The FHA Mortgagee Review Board also withdrew FHA approval for 123 mortgage companies that failed to meet the requirements for annual recertification.

A total of 91 lenders were allowed to retain their FHA lending approval, without admitting fault or liability, after paying fines between $1,000 to $7,500.  The lenders involved did not comply on time with the FHA’s recertification requirements but subsequently became in compliance.

It is not easy for borrowers to be certain that they are dealing with a reputable FHA mortgage company.  The FHA’s Mortgagee Review Board should conduct timely audits on a regular basis of all FHA approved lenders to protect both the consumers and the integrity of the FHA lending program.

A full list of the 260 FHA mortgage companies that the FHA took action against can be found in the Federal Registry.