FHA Penalizes Over 1,000 Lenders for Violating Regulatory Standards

By: Jann Swanson •

The Federal Housing Administration's Mortgagee Review Board (MRB) has revealed a list of over one thousand lenders against whom it has taken action over the last several months for violations of the agency's program requirements.

Infractions ranged from failing to notify the Department of Housing and Urban Development of changes in license status or office closures, improperly displaying FHA seals on company websites or advertising materials, and using non-employees to process loans, to failing to properly process or document credit, employment and appraisal information.   The actions taken by the Board included permanent withdrawal of FHA lending authority, suspensions, and fines ranging into the high six digits. 

"Lenders should know by now that FHA will not tolerate fraudulent or predatory lending practices," said FHA Commissioner David Stevens. "Any FHA-approved lender that does business with us must follow our standards. If we determine that our partners are not playing by the rules, we will take action - it's that simple."

Firms that were permanently banned from participation in FHA Programs were:

  • North Shore Financial, Inc, East Meadow NY for permitting non-employees and/or mortgage brokers to participate in the loan process and other violations.
  • Financial Mortgage USA, Inc.; also fined $97,500 for violations of requirements that led to loan defaults.
  • Ideal Mortgage Bankers Ltd./Lend America, Melville, NY.; also fined $512,500 for submitting false certifications, failing to adequately document the stability and/or source of income, and other violations.
  • Liberty State Finance, Parsippany, NJ; knowingly employing two individuals who were debarred and/or had been convicted of an offense.
  • North Shore Financial, Inc., East Meadow, NY; permitting non-employees and mortgage brokers to participate in the loan process and other violations.
  • Strategic Mortgage Corp., Oklahoma City, OK was also fined $71,000 for hiring independent contractors and incorrectly reporting compensation to the IRA; improperly charging borrowers a broker fee in addition to an origination fee, and violation of RESPA requirements.
  • USA Home Loans, Towson MD; failing to insure that minimum income, credit, and property condition requirements were met and failing to notify HUD that its license had expired.
  • U.S. Mortgage Corp, Pine Brook, NJ; failing to maintain an acceptable warehouse line of credit or other approved mortgage funding program.
  • Premium Capital Funding/TopDot Mortgage, Jericho, NY; also received a civil penalty of $674,000 for violations of requirements that led to loan defaults.
  • ProMortgage, Inc., Claremore, OK; also penalized $124,000 for violations of requirements that led to loan defaults.
  • Americare Investment Group/Premier Capital Lending, Arlington, TX; failing to comply with terms of an earlier settlement agreement.
  • Ikon Mortgage Lenders, Ft Lauderdale, FL; Federal Guaranty Mortgage Company, Pembroke Pines, FL; Automated Finance Corporation, Calabasas, CA; Premiere Service Mortgage Corp., Westchester, OH.; Direct Lending, Inc., Livonia, MI; Jett Financial Services, Inc., San Diego, CA; closing an office or losing license without notifying HUD

Suspensions of six months to a year and/or civil money penalties were assessed against:

  • Meridian Lending, Monroe, GA - One year suspension.
  • Action Mortgage Corporation, Cranston, RI - 6 months suspension and $7,000
  • Academy Mortgage Corp. Sandy, UT - $30,000
  • Assurety Financial Services, Englewood, CO - $7,500
  • Cooper and Shein LLC/Great Oak Lending Partners, Timonium, MD - 6 month probation and $11,000.
  • Equitable Trust Mortgage Corp., Baltimore, MD - $277,500 civil penalty, refund $147,589 in brokers fees to borrowers.
  • Franklin First Financial, Melville, NY - Civil penalty of $413,500; indemnify HUD on 31 loans, and reimburse fees to 78 borrowers.
  • Home Mortgage, Inc., Burr Ridge, IL - suspended pending the outcome of a federal indictment.
  • Nations Direct, LLC., Irvine, CA - $3,500
  • Paramount Bond Mortgage Company, St, Louis, MO - $68,500 penalty; indemnify HUD on nine loans.
  • Primewest Mortgage Corp., Lubbock, TX - $168,500.
  • Sun West Mortgage Company, Cerritos, CA - $10,000.
  • VanDyk Mortgage Corp., Grand Rapids, MI - $7,500; indemnify HUD on two loans

The MRB suspended 905 other companies for one year for failing to comply with the Department's annual recertification requirements and assessed $3,500 fines against 147 lenders which had been out of compliance but had cured that situation.

All of the actions and the reasons for them were published in The Federal Register dated July 26, 2010.