The Federal Housing Administration's (FHA's) Mortgagee
Review Board (MRB) has posted the results of formal actions taken against 240
lenders for failure to meet FHA requirements.
The current notice, posted in The Federal Register, is a summary of MRB
actions taken as far back as October 2009.
A total of 26 lenders fell into the category of "Settlement Agreements,
Civil Money Penalties, Withdrawals of FHA approval, Suspensions, Probations, Reprimands,
and Administrative Payments." Among the
areas where MRB can take action are:
- Failure to
implement and maintain a Quality Control Plan;
- Source of funds issues regarding the
borrower's down payment (e.g., improperly documented gift letters, insufficient
funds to close, use of unacceptable source of funds, and improperly documented
source of funds);
- Questionable income, assets and liabilities of
the borrower (e.g., failure to document discrepancies between the credit report
and credit application);
- Problems with appraisals (e.g., poor
comparables, unsubstantiated value adjustments, unsupported values based on the
information available, unreported physical deficiencies, "flip
transactions" involving a recent change in ownership or a different owner
than on the sales contract, and the same people involved in numerous
transactions);
- False statements and certifications;
- Excessive mortgage payment to income ratios
and debt to income ratios;
- Inaccurate HUD-1 Settlement Statements (e.g.,
charging unallowable fees);
- Failure to properly submit Mortgage Insurance
Premiums to HUD;
- Failure to comply with FHA's annual renewal
requirements;
- Improper branch operations (e.g., allowing employees
to work for other lenders or real estate firms).
Penalties were exacted for a wide range of infractions in the areas
above. In some cases approvals were permanently withdrawn, in other cases they were
suspended for periods of one to five years and in many cases were permanently
withdrawn. Civil penalties ranged from
nominal to several hundred thousand dollars.
The largest civil penalty was levied against Alacrity Lending of
Southlake Texas which was fined $237,500 for a litany of abuses including
failing to disclose a conflict of interest, violations of QC regulations,
improperly approving appraisal findings, loan-to-value ratios, and failing to
ensure flood insurance coverage. A fine
of $182,000 was assessed against Cambridge Home Capital of Great Neck, New York
for QC violations, and failure to properly document underwriting requirements.
In
addition, the Board withdrew HUD/FHA approval from 123 lenders. These lenders failed to meet the requirements
for annual HUD/FHA recertification requirements.
The
remaining penalties were assessed against 91 lenders which had initially failed
to meet the requirements for annual recertification but did ultimately cure the
deficiencies. These lenders were given
an opportunity to settle with the MRB and were required to pay a civil money
penalty of $1,000 to $7,500. These
lenders are now in compliance with FHA requirements.
"It's never been more important that lenders doing business with
FHA apply our standards to each and every loan they originate and underwrite,"
said Acting FHA Commissioner Carol Galante. "FHA requirements ensure homeowners
are put on a path of sustainable homeownership and that ultimately helps
stabilize entire neighborhoods and communities."
The MRB is composed of the Federal Housing Commissioner who serves
as Chairperson, the President of Ginnie Mae, HUD's General Counsel, HUD's Assistant
Secretary for Administration and its Chief Financial Officer and the Assistant
Secretary for Fair Housing and Equal Opportunity (who votes only on cases
involving Fair Housing and Equal Opportunity issues).
Since 2009, the MRB took
more than 2,300 administrative actions against lenders, including a record
1,600 last year alone. Meanwhile, FHA instituted a number of new rules
designed to strengthen risk management including increasing net worth
requirements of FHA-approved lenders, strengthening lender approval criteria,
and making lenders liable for the oversight of mortga