FHA's Mortgage Review Board Sanctions 240 Lenders

by devteam August 3rd, 2011 | Share

The Federal Housing Administration’s (FHA’s) MortgageernReview Board (MRB) has posted the results of formal actions taken against 240rnlenders for failure to meet FHA requirements. rnThe current notice, posted in The Federal Register, is a summary of MRBrnactions taken as far back as October 2009.  </p

A total of 26 lenders fell into the category of “Settlement Agreements,rnCivil Money Penalties, Withdrawals of FHA approval, Suspensions, Probations, Reprimands,rnand Administrative Payments.”  Among thernareas where MRB can take action are: </p<ul class="unIndentedList"

  • Failure tornimplement and maintain a Quality Control Plan;</li
  • Source of funds issues regarding thernborrower’s down payment (e.g., improperly documented gift letters, insufficientrnfunds to close, use of unacceptable source of funds, and improperly documentedrnsource of funds);</li
  • Questionable income, assets and liabilities ofrnthe borrower (e.g., failure to document discrepancies between the credit reportrnand credit application);</li
  • Problems with appraisals (e.g., poorrncomparables, unsubstantiated value adjustments, unsupported values based on therninformation available, unreported physical deficiencies, “fliprntransactions” involving a recent change in ownership or a different ownerrnthan on the sales contract, and the same people involved in numerousrntransactions);</li
  • False statements and certifications;</li
  • Excessive mortgage payment to income ratiosrnand debt to income ratios;</li
  • Inaccurate HUD-1 Settlement Statements (e.g.,rncharging unallowable fees);</li
  • Failure to properly submit Mortgage InsurancernPremiums to HUD; </li
  • Failure to comply with FHA’s annual renewalrnrequirements;</li
  • Improper branch operations (e.g., allowing employeesrnto work for other lenders or real estate firms).</li</ul

    Penalties were exacted for a wide range of infractions in the areasrnabove. In some cases approvals were permanently withdrawn, in other cases they werernsuspended for periods of one to five years and in many cases were permanentlyrnwithdrawn.  Civil penalties ranged fromrnnominal to several hundred thousand dollars.</p

    The largest civil penalty was levied against Alacrity Lending ofrnSouthlake Texas which was fined $237,500 for a litany of abuses includingrnfailing to disclose a conflict of interest, violations of QC regulations,rnimproperly approving appraisal findings, loan-to-value ratios, and failing tornensure flood insurance coverage.  A finernof $182,000 was assessed against Cambridge Home Capital of Great Neck, New Yorkrnfor QC violations, and failure to properly document underwriting requirements.</p

    Inrnaddition, the Board withdrew HUD/FHA approval from 123 lenders.  These lenders failed to meet the requirementsrnfor annual HUD/FHA recertification requirements.  </p

    Thernremaining penalties were assessed against 91 lenders which had initially failedrnto meet the requirements for annual recertification but did ultimately cure therndeficiencies.  These lenders were givenrnan opportunity to settle with the MRB and were required to pay a civil moneyrnpenalty of $1,000 to $7,500.  Thesernlenders are now in compliance with FHA requirements.</p

     “It’s never been more important that lenders doing business withrnFHA apply our standards to each and every loan they originate and underwrite,”rnsaid Acting FHA Commissioner Carol Galante. “FHA requirements ensure homeownersrnare put on a path of sustainable homeownership and that ultimately helpsrnstabilize entire neighborhoods and communities.”</p

    The MRB is composed of the Federal Housing Commissioner who servesrnas Chairperson, the President of Ginnie Mae, HUD’s General Counsel, HUD’s AssistantrnSecretary for Administration and its Chief Financial Officer and the AssistantrnSecretary for Fair Housing and Equal Opportunity (who votes only on casesrninvolving Fair Housing and Equal Opportunity issues). </p<pSince 2009, the MRB tookrnmore than 2,300 administrative actions against lenders, including a recordrn1,600 last year alone.  Meanwhile, FHA instituted a number of new rulesrndesigned to strengthen risk management including increasing net worthrnrequirements of FHA-approved lenders, strengthening lender approval criteria,rnand making lenders liable for the oversight of mortgarn

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  • About the Author


    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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