Mortgagee Review Board; Administrative Actions, 35249-35251 [E7-12374]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 72, Number 123 (Wednesday, June 27, 2007)]
[Notices]
[Pages 35249-35251]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-12374]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5157-N-01]


Mortgagee Review Board; Administrative Actions

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: In compliance with Section 202(c) of the National Housing Act, 
this notice advises of the cause and description of administrative 
actions taken by HUD's Mortgagee Review Board against HUD-approved 
mortgagees.

FOR FURTHER INFORMATION CONTACT: David E. Hintz, Secretary to the 
Mortgagee Review Board, 451 Seventh Street, Portals 200, SW, Room B-
133, Washington, DC 20410-8000, telephone: (202) 708-3856, extension 
3594. A Telecommunications Device for Hearing- and Speech-Impaired 
Individuals (TTY) is available at (800) 877-8339 (Federal Information 
Relay Service).

SUPPLEMENTARY INFORMATION: Section 202(c)(5) of the National Housing 
Act (added by Section 142 of the Department of Housing and Urban 
Development Reform Act of 1989, Pub. L. 101-235, approved December 15, 
1989), requires that HUD ``publish a description of, and the cause for, 
administrative action against a HUD-approved mortgagee'' by the 
Department's Mortgagee Review Board (Board). In compliance with the 
requirements of Section 202(c)(5), this notice advises of 
administrative actions that have been taken by the Board from October 
18, 2005, to March 26, 2007.

1. A&E Mortgage Company, LLC, Roselle, New Jersey, [Docket No. 02-1971 
MR]

    Action: Settlement Agreement signed September 7, 2006. Without 
admitting wrongdoing or fault, A&E Mortgage Company, LLC (A&E) agreed 
to pay HUD an administrative payment in the amount of $300,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where A&E: Used falsified and/or conflicting documents in the 
origination of eight HUD/FHA-insured mortgages; failed to ensure loan 
applications were taken by authorized employees; and used a loan 
officer contract which required the loan officer to pay her own 
expenses.

2. Atlantic Coast Mortgage Services, Pleasantville, NJ [Docket No. 06-
6026-MR]

    Action: Settlement Agreement signed February 8, 2007. Without 
admitting liability or fault, Atlantic Coast Mortgage Services 
(Atlantic) agreed to pay HUD an administrative payment in the amount of 
$9,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Atlantic: Failed to ensure that one of its employees worked 
exclusively for it; and failed to implement and maintain a Quality 
Control Plan in compliance with HUD/FHA requirements.

3. BSM Financial LP dba Banksource Mortgage, Addison, TX [Docket No. 
05-5047-MR]

    Action: Settlement Agreement signed October 4, 2006. Without 
admitting liability or fault, BSM Financial LP dba Banksource Mortgage 
(BSM) agreed to: Waive all insurance benefits or indemnify HUD for any 
losses on 15 HUD/FHA-insured loans; within 60 days of the effective 
date of the settlement agreement, provide documentation sufficient to 
demonstrate that BSM complied with HUD/FHA requirements relating to 
local health authority approval of private or cooperative water and 
sewage disposal systems with respect to three properties. If BSM failed 
to provide the documents within the timeframe agreed to, BSM would 
waive all insurance benefits or indemnify HUD for any losses that may 
be incurred in relations to the three loans if HUD is unable to sell 
the referenced properties subject to FHA insurance because of problems 
with the water and/or septic systems; pay HUD $49,784 which represents 
the aggregate amount by which the principal balances of eight loans 
were over-insured at the time of commitment; and pay HUD an 
administrative payment in the amount of $150,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where BSM: Failed to remit Upfront Mortgage Insurance Premiums in a 
timely manner; failed to implement and maintain a Quality Control Plan 
that complied with HUD/FHA requirements; failed to properly verify, 
document and/or calculate income used in loan qualification in 
accordance with HUD/FHA requirements; failed to document the source of 
funds required to close and/or pay off debts, or there were

[[Page 35250]]

insufficient funds verified to close and/or pay off debts; calculated 
borrowers' total mortgage payments (including principal, interest, 
taxes and hazard insurance) using real estate taxes that were 
understated and, in some cases, also improperly omitted debts when 
assessing loan qualification; failed to comply with HUD/FHA 
requirements regarding qualification for streamline refinance 
transactions; approved loans with ratios exceeding HUD/FHA benchmark 
guidelines without compensating factors or without adequate 
compensating factors; allowed credit reports and/or income to asset 
verification forms and documentation to pass through the hands of third 
parties and, in certain cases, falsely certified that the documents 
were requested and received directly by BSM from the providers and/or 
that the documents received were true copies of the originals; allowed 
a non-purchasing spouse to take an ownership interest in a HUD/FHA-
insured property, in violation of mortgage eligibility requirements; 
failed to ensure that property that was proposed or under construction 
was eligible for HUD/FHA mortgage insurance; closed loans in excess of 
the maximum allowable amount resulting in over-insured mortgages; 
failed to comply with Construction-Permanent Loan Program requirements; 
failed to ensure that the buyer, seller and/or settlement agent 
completed HUD-1 Addendum certifications; allowed one of its 
underwriters to also perform work for a manufactured housing seller; 
and used falsified documents and/or documents that contained unresolved 
discrepancies in the origination of HUD/FHA-insured mortgage loans.

4. Citrus State Mortgage, Incorporated, Mount Dora, FL [Docket No. 05-
5079-MR]

    Action: Settlement Agreement signed September 15, 2006. Without 
admitting liability or fault, Citrus State Mortgage, Incorporated 
(Citrus) and its President agreed to pay HUD an administrative payment 
in the amount of $35,000. Citrus also agreed not to reapply for 
reinstatement as an FHA-approved lender until March 1, 2008.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Citrus: Paid prohibited referral fees to another entity 
controlled by one of the Citrus's underwriters; paid its underwriters 
prohibited commission payments; charged prohibited document preparation 
fees to an entity owned and controlled by one of Citrus's underwriters; 
and failed to develop and implement a Quality Control Plan and failed 
to perform a Quality Control review of two loans that went into default 
within the first six months.

5. Colban Funding, Incorporated, Endwell, NY [Docket No. 04-4587-MR]

    Action: On October 18, 2005, the Board issued a letter to Colban 
Funding, Incorporated (Colban) withdrawing its HUD/FHA approval for 
three years. The Board also voted to impose a civil money penalty in 
the amount of $76,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Colban: Violated HUD/FHA third party restrictions by allowing non 
HUD/FHA-approved mortgage brokers to participate in the origination of 
HUD/FHA-insured mortgages; falsely certified on forms HUD-92900-A, 
Addendum to the Uniform Residential Loan Application that the 
information contained in the Uniform Residential Loan Application and 
the Addendum was obtained directly from the borrower by a full-time 
employee of Colban or its duly authorized agent; failed to identify all 
of the HUD/FHA-approved lenders involved in the origination of HUD/FHA 
insured mortgage loans on HUD-92900-A and in HUD's database system; 
failed to provide evidence that, where faxed documents were used, 
original verification documents were received and reviewed; failed to 
ensure that borrowers met the three percent minimum required cash 
investment; failed to provide adequate analysis or data verification of 
prior sales that occurred within one year of the appraisal report for 
three HUD/FHA-insured loans; failed to include and/or adequately 
evaluate borrower's debt when underwriting loans; failed to adequately 
document the source and transfer of funds used for the downpayment and/
or closing costs; failed to identify incorrect and inconsistent 
information on the HUD-1 Settlement Statement that affected conditions 
under which the loan was closed.

6. Colony Mortgage Corporation, Fairview Park, OH [Docket No. 05-5057-
MR]

    Action: Settlement Agreement signed August 22, 2006. Without 
admitting liability or fault, Colony Mortgage Corporation, (Colony) 
agreed to pay HUD an administrative payment in the amount of $38,000. 
Colony also agreed to indemnify HUD for any losses on two loans.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Colony: Violated third party origination restrictions by 
sponsoring loans from an unapproved entity; caused a false 
certification on form HUD-92900-A; failed to document the source and/or 
adequacy of funds for the downpayment and/or closing costs; failed to 
properly verify the borrower's income and/or stable employment history; 
failed to ensure that borrowers were not suspended, debarred or 
otherwise excluded from participating in the Department's programs; and 
failed to develop and implement a Quality Control Plan in accordance 
with HUD/FHA requirements.

7. Faith Financial Group, Incorporated, Miami Lakes, FL [Docket No. 05-
5041-MR]

    Action: Settlement Agreement signed October 20, 2006. Without 
admitting liability or fault, Faith Financial Group, Incorporated 
(Faith) agreed to pay HUD an administrative payment in the amount of 
$8,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Faith: Failed to adopt, implement and maintain a Quality Control 
Plan in compliance with HUD/FHA requirements; and failed to ensure that 
its employees worked exclusively for Faith.

8. First Source Financial USA, Incorporated, Las Vegas, NV [Docket No. 
06-6009 MR]

    Action: On March 26, 2007, First Source Financial USA, 
Incorporated, Las Vegas, NV was served with the Government's Complaint 
for Civil Money Penalty in the amount of $258,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where First Source Financial USA, Incorporated (First Source): 
Submitted false information in loan packages to HUD for HUD/FHA 
mortgage insurance; and engaged in prohibited net branching and 
prohibited loan origination arrangements.

9. Homewide Lending Corporation, City of Industry, CA [Docket No. 05-
5062-MR]

    Action: Settlement Agreement signed October 2, 2006. Without 
admitting liability or fault, Homewide Lending Corporation (Homewide) 
agreed to pay

[[Page 35251]]

HUD an administrative payment in the amount of $48,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Homewide: Failed to implement and maintain a Quality Control Plan 
in compliance with HUD/FHA requirements (repeat finding); submitted 
false and/or conflicting income and employment documentation to 
originate HUD/FHA-insured loans; allowed real estate agents to hand-
carry Verification of Employment in violation of HUD/FHA requirements; 
violated HUD/FHA third party origination restrictions; and submitted 
false gift or budget documentation to originate HUD/FHA-insured loans.

10. Moreland Financial Corporation, Fort Washington, PA [Docket No. 04-
4433-MR]

    Action: On January 17, 2007, the Board issued a letter to Moreland 
Financial Corporation (Moreland) withdrawing Moreland's FHA-approval.
    Cause: The Board took this action because Moreland failed to pay a 
civil money penalty in the amount of $22,000 previously imposed by the 
Board.

11. Shore Financial Services, Incorporated, Birmingham, MI [Docket No. 
06-6017 MR]

    Action: Settlement Agreement signed January 24, 2007. Without 
admitting liability or fault, Shore Financial Services, Incorporated 
(Shore) agreed to pay HUD a civil money penalty in the amount of 
$29,500. Shore also agreed to indemnify HUD for any losses on four 
loans.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Shore: Failed to ensure that loans that went into default within 
the first six months were reviewed as part of its Quality Control 
procedure; failed to document the source of Earnest Money Deposit 
funds, or funds to close; failed to document a stable two-year 
employment history for the borrowers; failed to ensure that borrower 
met the minimum credit requirements; and failed to reconcile 
incongruities in appraisals prior to submission to HUD, and/or accepted 
incomplete appraisal reports that did not support the final value 
consideration.

12. Towne Mortgage and Realty, Sterling Heights, MI [Docket No. 06-
6033-MR]

    Action: Settlement Agreement signed February 1, 2007. Without 
admitting liability or fault, Towne Mortgage (Towne) agreed to pay HUD 
an administrative payment of $26,601.37 ($20,601.37 as indemnification 
for two loans and $6,000 as an administrative payment).
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in the origination of HUD/FHA-insured loans 
where Towne: Failed to ensure borrowers met minimum credit 
requirements; and failed to properly verify borrower's income and/or 
stability of income.

13. USA Home Loans, Incorporated, Towson, MD [Docket No. 06-6029-MR]

    Action: On January 17, 2007, the Board issued a letter of reprimand 
to USA Home Loans, Incorporated (USA Home). The Board also imposed a 
civil money penalty in the amount of $2,000.
    Cause: The Board took this action because USA Home used misleading 
advertising regarding the FHA Single Family Mortgage Insurance Premium 
refund program.

    Dated: June 14, 2007.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. E7-12374 Filed 6-26-07; 8:45 am]
BILLING CODE 4210-67-P