Is Your Bank One of the 905 Mortgage Lenders Suspended by HUD?

Published by nora | Filed under Buyer / Seller Tips, Market Trends, Mortgage / Finance, Real Estate, Shout Outs

Are you planning to apply for a home loan? Check if your bank is one of the more than one thousand banks that received notices of suspension, reprimand, probation, fines and other administrative sanctions from the Department of Housing Urban and Development’s Federal Housing Administration from July 2008 to March 2010.

While there were 147 mortgage lenders that were able to cure their failure to meet requirements for their annual recertification of FHA approval, there were 905 mortgage lenders who failed to comply with HUD requirements and cure their failure. As a result, the HUD suspended FHA approval for a period of one year for these 905 lenders. In addition, there were also 32 mortgage lenders that were hit with different actions, including settlement agreements and civil money penalties.

Among these 32 lenders were big banks like US Bank, U.S. Mortgage Corp., CitiMortgage, Nations Direct, Strategic Mortgage Corp., Assurity Financial Services, Liberty State Finance, North Shore Financial, Meridian Lending, and Automated Finance Corp, but some of them were able to cure their problems and settle with the HUD. In February this year, US Bank had to pay $37,500 for failing to file required documentation before assigning a distressed multifamily property mortgage.

During the same month, the HUD also settled with CitiMortgage which agreed to make an administrative payment of $700,000 without admitting liability or fault. CitiMortgage committed several violations that include failure to report delinquent mortgage loans to HUD on time, failure to correct reporting errors in the HUD Single Family Default Monitoring System and non-compliance to default servicing reporting and quality control rules.

The other causes of HUD sanctions on mortgage lenders were improper use of the HUD seal on web sites, collection of excessive loan origination fees, failure to notify HUD of the closure of an approved office, misrepresentation of a website as endorsed by the HUD, and failure to document the sources of funds used in closing loans.

The action taken against U.S. Mortgage Corp. was severe as the HUD withdrew permanently the lender’s FHA approval in October last year after the lender’s warehouse line of credit and mortgage-funding program was found to be no longer satisfactory.

As of the third week of July, the HUD said it has issued almost 1,500 administrative sanctions against mortgage lenders. According to HUD officials, the sanctions should show lenders the FHA is already stepping up its efforts against predatory and fraudulent lending practices, including the practice of discriminating against certain groups applying for home loans. They reiterated that any bank that wants to continue doing business with the HUD must follow its rules and standards.

To check if your bank is not among those sanctioned by the HUD, check out the July 26, 2001 issue of the Federal Register, which can be accessed on the website of the Government Printing Office.