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FHA Mortgagee Review Board Settles with Massachusetts Lender

The ""Federal Housing Administration's"":http://www.fha.gov Mortgagee Review Board (MRB) has settled with Massachusetts mortgage lender ""First American Mortgage Trust"":http://www.nxtloan.com/ (FAMT) for failing to verify whether borrowers could sustain mortgage payments prior to refinancing loans.

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The MRB claimed FAMT refinanced mortgage loans for borrowers with serious credit delinquencies without determining the households' ability to manage credit.

FAMT agreed to pay $72,500, reimburse FHA for past insurance claims, and indemnify FHA's insurance fund for any claims to be paid on certain mortgages should they default within the next 60 months.

FHA's review board sanctions FHA-approved lenders for violations of the agency's program requirements.

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The board can withdraw a lender's FHA approval for serious violations, prohibiting them from participating in FHA programs. The board can also enter into settlement agreements with lenders as well as impose civil money penalties, probation, suspension, and issue letters of reprimand for less serious cases.

In this fiscal year, the MRB took 19 administrative sanctions against lenders, including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.

In October 2010, ""HUD"":http://www.hud.gov proposed new regulations to strengthen its authority to force certain lenders to indemnify or reimburse FHA for insurance claims paid on mortgages that do not meet guidelines.

HUD's proposed rule would require all new and existing lenders with the ability to insure mortgages on HUD's behalf to meet stricter standards to gain and maintain approval status.

In a statement, Bob Ryan, acting FHA commissioner, discussed lender responsibilities.

""FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund but to make certain families can sustain their mortgages,"" he said. ""Due diligence is at the root of mortgage lending protecting lenders, the FHA, and certainly homeowners from the prospect of foreclosure.""

About Author: Heather Cernoch

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