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FHA Takes Action Against Multiple Lenders

Based upon serious violations of ""Federal Housing Administration"":http://www.hud.gov/offices/hsg/fhahistory.cfm (FHA) requirements, the FHA ""Mortgage Review Board"":http://www.hud.gov/offices/hsg/sfh/mrb/mrbhome.cfm (MRB) announced Tuesday that it is immediately and permanently withdrawing FHA approval of four mortgage lenders and is suspending a fifth.

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The MRB withdrew FHA approval of ""Strategic Mortgage Corporation"":http://strategicmc.com/default.aspx, ""ProMortgage, Inc."":http://www.mypml.com/, Americare Investment Group, Inc., and ""Premium Capital Funding, LLC"":http://www.topdot.com/, doing business as TopDot Mortgage. In addition, the MRB has suspended the FHA approval of Home Mortgage, Inc., (HMI). The withdrawal of FHA approval will permanently prevent Strategic, ProMorgage, Americare, and TopDot from participating in FHA programs, and the suspension of HMI will apply for a minimum of six months or until a federal court rules in a related matter.

""FHA takes its oversight role very seriously and will move swiftly and decisively to protect borrowers from unscrupulous lenders,"" said David Stevens, FHA commissioner. ""Any lender who refuses to comply with FHA requirements will simply no longer enjoy the privilege of participating in FHA programs.""

According to the MRB, Oklahoma City-based 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. In addition to withdrawing FHA approval, the MRB voted to seek a civil monetary penalty from the lender in the amount of $71,000.

ProMortgage, based in Claremore, Oklahoma, did not adopt and maintain a quality control plan, failed to perform quality control reviews of loans that went into default within six months after closing, engaged in a prohibited branch arrangement, made false certifications on the HUD/Veterans Affairs addendum to the Uniform Residential Loan Application, failed to comply with home office operation requirements, and failed to report employee compensation on the appropriate form. The lender also allowed borrowers to provide verification of employment directly to the lender, creating an opportunity for manipulation of falsification of documents

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submitted. ProMortgage has lost FHA approval, and the MRB is seeking a monetary penalty from the company in the amount of $124,000.

Arlington, Texas-based Americare lost FHA approval after it breached the terms of a settlement with HUD by failing to make its required monthly payments. On October 8, 2009, the board entered into a settlement with Americare, requiring the company to pay off a monetary penalty of $124,000 and placing it on probation for a period of six months. However, Americare failed to make a single monthly payment as required under the terms of the agreement.

TopDot, based in Jericho, New York, completed numerous and egregious violations of FHA requirements, including failure to document borrowers' income, failure to evaluate borrowers' creditworthiness, and approving loans with grossly excessive debt-to-income ratios without factors to justify approval. As a result, the lender lost FHA approval, and the MRB is seeking a monetary penalty of $674,000. In addition, Ginnie Mae is defaulting and terminating TopDot as an issuer of its mortgage-backed securities program and is ending the lender's ability to continue servicing Ginnie Mae securities.

In June 2009, Burr Ridge, Illinois-based HMI's part owner and CEO was indicted in the U.S. District Court for the Northern District of Illinois for his role in a scheme to obtain money for 450 fictitious residential mortgage loans, and a guilty plea was entered on January 15,2010. Despite his indictment and subsequent guilty plea for bank fraud, HMI retained this executive and failed to notify HUD of this indictment as required. In addition, HMI failed to comply with FHA's annual recertification requirements. As a result, the MRB has suspended the lender's FHA approval.

In addition to these actions, the MRB announced that it has put two other lenders on probation for violating FHA requirements. ""Action Mortgage Corporation"":http://actionmtg.net/, based in Cranston, Rhode Island, was placed on probation for a period of six months for its misleading advertising practices, and the MRB voted to impose a monetary penalty of $7,000. Titonium, Maryland-based ""Cooper and Shein, LLC"":http://greatoaklending.com/, doing business as Great Oak Lending Partners, was also placed on probation for six months for misleading advertising practices, and the MRB is seeking a monetary penalty of $11,000.

Lenders may appeal the MRB's sanctions by submitting a written request for a hearing before an administrative law judge within 30 days. However, the filing of an appeal does not delay these actions. Complaints seeking these civil money penalties will be served upon Strategic, ProMortgage, TopDot, Action Mortgage, and Great Oak Lending Partners in due course, and the lenders will have the opportunity to contest the imposition of the penalties before an administrative law judge.

About Author: Brittany Dunn

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