Officials at the Federal Housing Administration (FHA) have warned that they will be keeping a close eye on lenders to ensure the agency's standards are being followed, and that pledge became painfully apparent for two mortgage companies last week. ""FHA said Thursday"":http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-064 that it has permanently withdrawn its approval of Atlanta-based RSA Financial, Inc. and ""1st Alliance Mortgage LLC"":http://www.1stalliancemortgage.com of Houston, Texas.
[IMAGE] The actions prevent the two lenders from originating and underwriting new FHA-insured mortgages or from participating in the FHA single family insurance program. HUD's Mortgagee Review Board (MRB) also voted to impose a $15,000 civil penalty against RSA and seek $267,900 from 1st Alliance.
""If lenders want to do business with the FHA, it's critical that they provide complete and truthful information so that we can properly determine who we're dealing with,"" said FHA Commissioner David Stevens. ""If any lender can't operate within FHA's guidelines, they can't do business with us.""
HUD's MRB cited RSA for misleading HUD that it was properly licensed, after having failed to obtain the proper authorization from the Georgia Department of Banking and Finance at the time the company submitted an application to FHA for lender approval. In addition, the MRB alleges that RSA submitted false and misleading information regarding the criminal conviction and sanction history of its owner and executive, Ramsey Suphi Agan.
RSA represented that its corporate officials had never been sanctioned, debarred, convicted, or denied approval by any government agency, when in fact Agan has been suspended and debarred by HUD on at least two occasions and has two felony convictions. He pled guilty to two counts of knowingly submitting false statements for the purposes of influencing the actions of a federally insured bank in 1982 and was convicted of multiple counts of bribery by a Georgia court in 1988.[COLUMN_BREAK]
In 1st Alliance's case, HUD claims the company engaged in prohibited branch arrangements, provided false certifications, failed to implement quality controls, and committed a number of other violations of HUD/FHA standards. The MRB alleges that 1st Alliance used independent contractors to originate 708 loans from branch offices that were not true branches of the company and then falsely certified these contractors were full-time employees of the company.
The MRB also contends 1st Alliance failed to adopt and maintain a required Quality Control Plan; failed to properly report employee compensation to the IRS; charged consumers excessive, and in some cases duplicative, loan processing and origination fees; and failed to properly ensure that fees ""paid outside of closing"" were listed on borrowers HUD-1 Settlement Statements, as mandated under new Real Estate Settlement and Procedures Act (RESPA) rules.
In addition to the withdrawal actions against RSA and 1st Alliance, HUD also announced two settlement agreements with FHA-approved lenders to resolve alleged violations of HUD/FHA requirements.
""Franklin First Financial, Ltd."":https://www.franklinfirstfinancial.com agreed to pay a civil penalty to HUD in the amount of $413,500 and indemnify HUD for any losses which have been or may be incurred with respect to 31 FHA-insured mortgages. HUD and the Melville, New York-based lender agreed that the company will pay FHA for any losses related to these loans if they are in default or go into default for up to five years after they were endorsed. Franklin also agreed to reimburse 78 borrowers the cost of duplicate appraisals and appraisal reviews that the company performed in order to sell these mortgages on the secondary market.
""Paramount Bond and Mortgage Co."":http://www.paramountmortgage.com agreed to pay a civil penalty to HUD in the amount of $68,500 and indemnify HUD for any losses which have been or may be incurred with respect to seven FHA-insured mortgages. HUD and the St. Louis-based mortgage lender also agreed that the company repay FHA $146,397 in insurance claims already paid on two loans.
Last week's actions are part of a broader enforcement effort by FHA against mortgage lenders for violating its requirements.
Within the past year alone, the federal agency has suspended several high-volume FHA-approved lenders, including Taylor, Bean and Whitaker, and withdrawn FHA-approval for 354 others, including Lend America and Financial Mortgage USA. It's a significant increase over 2008, when only 28 lenders lost their FHA-approval.