03-4037. Mortgagee Review Board; Administrative Actions

AGENCY:

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

ACTION:

Notice.

SUMMARY:

In accordance with section 202(c) of the National Housing Act, this document provides notice of the cause and description of administrative actions taken by HUD's Mortgagee Review Board against HUD-approved mortgagees.

FOR FURTHER INFORMATION CONTACT:

D. Jackson Kinkaid, Secretary to the Mortgagee Review Board, 451 Seventh Street, SW., Washington, DC 20410, telephone: [phone], extension 3574 (this is not a toll-free number). A telecommunications device for hearing and speech-impaired individuals is available at 1-800-877-8339 (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 HUD's Mortgagee Review Board. In accordance with the requirements of section 202(c)(5), notice is given of administrative actions that have been taken by the Mortgagee Review Board from January 1, 2002, through March 31, 2002.

1. Allied Financial Services, Inc., Birmingham, AL

Action: In a letter dated December 13, 2000, the Board withdrew HUD's approval, specifically, the approval of the Federal Housing Administration (HUD/FHA), of Allied Financial Services, Inc.'s (AFS) approval for three years. The Board also voted to impose a civil money penalty.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: AFS failed to file annual loan origination reports for 1997-1999, which supplements the requirements of the Home Mortgage Disclosure Act; AFS used false documentation to originate a HUD/FHA loan; AFS failed to ensure that only AFS employees process HUD/FHA loans; AFS employed a loan officer who was not an exclusive employee; and AFS failed to provide complete loan origination files and/or documents for review.

2. Custom Mortgage Corporation, San Antonio, TX

Action: Settlement Agreement signed January 11, 2002. Without admitting fault or liability, Custom Mortgage Corporation (CMC) agreed to pay a civil money penalty.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: CMC failed to maintain and implement a Quality Control Plan in compliance with HUD/FHA requirements; CMC accepted eleven loans originated by personnel not employed by CMC; and CMC paid fees and compensation to unauthorized individuals in connection with nine loans.

3. Fidelity Mortgage & Funding Co., Memphis, TN

Action: In a letter dated February 12, 2002, the Board withdrew the HUD/FHA approval of Fidelity Mortgage & Funding Co. (Fidelity) approval for five years. In addition, the Board voted to impose a civil money penalty.

Cause: The Board took these actions based on the following findings of violations of HUD/FHA requirements: In 106 loans, Fidelity allowed non-employees to participate in the origination of loans to be insured by HUD/FHA; and Fidelity failed to develop, maintain, and implement a Quality Control Plan that meets HUD guidelines.

4. First Mortgage of Indiana, Inc., Indianapolis, IN

Action: Settlement Agreement signed January 30, 2002. Without admitting fault or liability, First Mortgage of Indiana, Inc. (FMI) agreed to pay a civil money penalty.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: FMI failed to maintain and implement a Quality Control Plan in compliance with HUD/FHA requirements; and FMI charged certain fees which were not allowed; and FMI used a rubber stamp to sign the Lender's Certification on page four of HUD Form 92900-A prior to closing.

5. Golden Empire Mortgage, Inc., Bakersfield, CA [Docket No. 98-853-MR]

Action: Settlement Agreement was signed March 26, 2002. Without admitting fault or liability, Golden Empire Mortgage, Inc. (GEM) agreed to pay a civil money penalty. In addition, GEM agreed to indemnify HUD for any losses incurred on 12 loans.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: GEM failed to notify HUD of violations which were discovered by GEM's own quality control review; GEM failed to notify HUD that certain fraudulent documents were discovered during GEM's quality control review; GEM permitted straw buyers to qualify for HUD/FHA insured mortgages; GEM failed to require that all borrowers meet their required investment; GEM failed to correctly calculate the borrower's income in certain loans; and GEM failed to require that all repairs and/or valuation conditions were satisfied.

6. Jack Johnson and Associates, Inc., d/b/a Home Equity Mortgage, Riverside, CA

Action: Settlement Agreement signed February 7, 2002. The Board withdrew the HUD/FHA approval of JJAI for a period of five years. Without admitting fault or liability, Jack Johnson and Associates, Inc. (JJAI), doing business as (d/b/a) Home Equity Mortgage agreed to pay a civil money penalty.

Cause: The Board took this action based the following violations of HUD/FHA requirements: JJAI failed to file annual loan origination reports for 1992-1999, which supplements the requirements of the Home Mortgage Disclosure Act; JJAI failed to maintain and implement a quality control plan in compliance with HUD requirements; JJAI permitted an investor to circumvent the restrictions on FHA insured loans to investors; JJAI permitted false information to be used in originating loans and obtaining HUD/FHA mortgage insurance; and JJAI allowed non-employees to take loan applications for three FHA-insured loans.

7. Pac West Financial Corporation, Ontario, CA

Action: Settlement Agreement signed January 11, 2002. Without admitting fault or liability, Pac West Financial Corporation (PWF) agreed to pay a civil money penalty. In addition, PWF agreed to indemnify HUD for any losses incurred on eight loans.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: PWF failed to maintain and implement a Quality Control Plan in compliance with HUD requirements; PWF failed to file annual reports regarding loan activity; PWF used falsified documentation and/or conflicting information in originating 8 loans and obtaining HUD/FHA mortgage insurance; PWF allowed mortgagors to sign loan documents in blank form in two cases; and PWF failed to ensure that gift letters met HUD requirements in 18 loans.

8. Ron Simpson & Associates d/b/a Rockwell Mortgage Company, Farmington Hills, MI

Action: Settlement Agreement signed March 7, 2002. Without admitting fault or liability, Ron Simpson & Associates, d/b/a Rockwell Mortgage Company (RMC), agreed to pay a civil money penalty.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: RMC employed loan officers who were not exclusive employees; RMC failed to implement and maintain a Quality Control Plan in complete conformity with HUD/FHA requirements; RMC failed to maintain complete origination files and; RMC charged borrowers fees not permitted by HUD.

9. Southern Mortgage Investment Corporation, Winter Park, FL

Action: In a letter dated May 8, 2002, the Board withdrew the HUD/FHA approval of Southern Mortgage Investment Corporation (SMIC) approval for three years. In addition, they agreed to pay a civil money penalty.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: SMIC failed to establish and maintain a Quality Control Plan for the origination of HUD/FHA insured mortgages; SMIC allowed the handling of loan documents by an interested third party; and SMIC failed to maintain complete loan files.

10. Underline, Inc., d/b/a Advantage Mortgage Services, Santa Ana, CA

Action: Settlement Agreement was signed on March 20, 2002. Without admitting fault or liability, Underline, Inc.(UI) d/b/a/ Advantage Mortgage Services agreed to pay a civil money penalty.

Cause: The Board took this action based on the following violations of HUD requirements: UI allowed non-employees to originate HUD/FHA insured loans, and UI failed to implement a Quality Control Plan in compliance with HUD requirements by allowing non-employees to originate HUD/FHA insured loans.

11. Utah Mortgage Loan Corporation, Midvale, UT

Action: Settlement Agreement letter was signed February 9, 2002. Without admitting fault or liability, Utah Mortgage Loan Corporation (UMLC) agreed to pay a civil money penalty.

Cause: The Board took this action based on the following violations of HUD/FHA requirements: UMLC failed to maintain and implement a Quality Control Plan in compliance with HUD requirements; UMLC permitted non-UMLC employees to originate FHA loan applications; UMLC failed to pay the operating expenses of an employee; UMLC paid unallowable fees/compensation in connection with HUD/FHA insured mortgages to non-employees; UMLC paid origination commissions to UMLC Direct Endorsement Underwriter who also performed the Quality Control Audits on HUD/FHA loans; and UMLC leased office space to another entity that was not physically separate and apart from UMLC.

Dated: February 6, 2003.

John C. Weicher,

Assistant Secretary for Housing-Federal Housing Commissioner, Chairman, Mortgagee Review Board.