05-9142. Mortgagee Review Board; Administrative Actions

AGENCY:

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

ACTION:

Notice.

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, SW., Washington, DC 20410-8000, telephone: [phone], extension 3594. A Telecommunications Device for Hearing- and Speech-Impaired Individuals (TTY) is available at [phone] (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 July 1, 2004, to December 31, 2004.

1. Academy Mortgage Corporation, Salt Lake City, Utah, [Docket No. 04-4399-MR]

Action: Settlement Agreement signed March 18, 2005. Without admitting fault or liability, Academy Mortgage Corporation (Academy) agreed to pay HUD a civil money penalty in the amount of $288,500 and indemnify HUD on four loans. Academy also agreed to reimburse each borrower identified in Attachment B to the Settlement Agreement, fees identified as unallowable by HUD.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where Academy: Violated requirements governing conflict of interest by paying commissions to loan officers who had received payment from another source in the same HUD/FHA loan transaction; failed to properly verify the effectiveness, adequacy and/or stability of income used in qualifying borrowers; failed to properly verify the source and adequacy of funds required for closing; failed to ensure outstanding judgments were satisfied prior to closing the loan; failed to document that it reviewed the real estate appraisals for 64 HUD/FHA insured mortgage loans that it underwrote. Specifically, Academy did not document that it analyzed appraisals that showed large increases in value and recent sales; charged borrowers unallowable fees, such as documentation preparation fee, document review fee, funding fee, wire fee, Administrative Compliance fee, Neighborhood Gold fee, and Wire review fee, among others; and failed to retain entire case files for loans it originated.

2. Chess Financial Services, Inc., Camp Springs, MD [Docket No. 04-4355-MR]

Action: The Board voted to reject Chess Financial Services, Inc.'s (Chess) settlement offer and imposed a civil money penalty of $43,500.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where Chess: permitted its employees to process loans in which they were interested parties; permitted three individuals who were not employees, or who were not excusive employees, to originate mortgages; failed to maintain a quality control plan for the origination of HUD/FHA insured mortgages for two fiscal years, and failed to complete quality control reviews in accordance with HUD/FHA requirements; and failed to maintain complete loan origination files for review and to comply with HUD's requests for documentation.

3. First Service Mortgage, Inc., College Park, GA [Docket No. 04-4440-MR]

Action: Settlement Agreement signed December 20, 2004. Without admitting fault or liability, First Service Mortgage, Inc. (First Service) agreed to pay an administrative payment of $16,350 and indemnify HUD for any losses on two loans.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where First Service: failed to remit Mortgage Insurance Premium (MIP) within 15 days; failed to ensure employees worked exclusively for First Service submitted false and conflicting documentation to obtain HUD/FHA Mortgage Insurance; failed to maintain a Quality Control Plan that complies with HUD/FHA requirements; and originated a second FHA-insured mortgage without obtaining the required information, and without resolving discrepancies.

4. First Union National Bank d/b/a Wachovia Bank, N.A., Raleigh, NC [Docket No. 04-4230-MR]

Action: Settlement Agreement signed January 6, 2005. Without admitting fault or liability, Wachovia Bank, N.A. (Wachovia) agreed to pay an administrative payment of $8,500.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where First Union National Bank (First Union): failed to notify HUD of its merger with Wachovia; and First Union failed to timely perform property inspection on one HUD/FHA insured multifamily project.

5. International Home Mortgage Capital Corporation, Las Vegas, NV [04-4388-MR]

Action: On November 29, 2004, the Board issued a letter to International Home Mortgage Capital Corporation (International Home Mortgage) immediately withdrawing its HUD/FHA approval for five years. The Board also voted to impose a civil money penalty in the amount of $118,000.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where International Home Mortgage: Failed to implement a Quality Control Plan in accordance with HUD/FHA requirements; failed to verify the source and adequacy of borrowers' funds to close their loans; failed to verify and analyze borrowers' effective income; failed to analyze borrowers' liabilities; failed to ensure compliance with HUD/FHA credit requirements for borrowers; and failed to calculate the maximum mortgage amount.

6. Mann Financial, Inc., Helena, MT [Docket No. 04-4280-MR]

Action: Settlement Agreement signed March 29, 2005. Without admitting fault or liability, Mann Financial, Inc. (Mann) agreed to pay HUD an administrative payment in the amount of $46,000 and indemnify HUD on four loans. Mann also agreed to pay HUD $3,982 as pay-down of principal on two loans.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where Mann: Failed to ensure HUD/FHA loans were originated by Mann employees; submitted false certifications to HUD regarding whether information was obtained directly from the borrowers by full-time employees of the lender; underwrote mortgages for mortgagees that were not approved loan correspondents for Mann; failed to implement fully its quality control plan in that it did not review eight defaulting mortgages; failed to document adequately the borrower's source of funds for the down payment and/or closing costs; failed to ensure that the allowable maximum mortgage amount was not exceeded; admitted underwriter error caused a mortgage amount in excess of the maximum allowed and has offered to pay-down the mortgage in connection with a settlement; failed to document accurately and/or calculate the borrower's effective income. Specifically, Mann failed to document that SSI income would continue for the first three years of a mortgage; failed to document income and Mann did not establish a sufficient employment history; failed to meet the underwriting requirements relative to a temporary interest rate buy down. Specifically, Mann did not demonstrate that borrowers for three mortgages had likelihood for increased income after the buy down period ended; and failed to document the contributory value of sweat equity labor. Mann failed to document the market value of a borrower's roofing, siding, framing, carpentry and painting.

7. Mirad Financial Group, Inc., San Diego, CA [Docket No. 03-3159-MR]

Action: Settlement Agreement signed October 1, 2004. Without admitting fault or liability, Mirad Financial Group, Inc., (Mirad) agreed to pay a civil money penalty of $46,000. Mirad also agreed to indemnify HUD for any losses incurred on six loans.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where Mirad: Failed to ensure that loan officer who originated three loans was not suspended from participating in government programs; used independent contractors to originate 18 FHA-insured loans; underwrote loans for mortgagees that were not on HUD's list of approved loan correspondents for Mirad; failed to adequately document gift funds used for downpayment and/or closing costs; failed to ensure that the borrower met the 3 percent minimum downpayment requirement; failed to ensure the borrower did not exceed the maximum allowable mortgage; failed to obtain a satisfactory explanation of the borrower's late payments, charge-offs and collection accounts; and failed to adequately document that the seller owned the property.

8. Realty Mortgage Corporation, Flowood, MS [Docket No. 04-4443-MR]

Action: Settlement Agreement signed November 12, 2004. Without admitting fault or liability, Realty Mortgage Corporation (Realty Mortgage) agreed to pay HUD an administrative payment of $81,500 and indemnify HUD on three loans.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where Realty Mortgage: Accepted loans that were originated by a non-HUD approved lender; underwrote the loans which clearly indicated that a third party was involved in the origination; failed to adequately verify the source and/or adequacy of funds used for earnest money deposits and/or close loan transactions; closed loans in excess of the maximum allowable mortgage amount resulting in over-insured mortgages; and failed to close loans in accordance with the terms of the sales contracts and/or to obtain the required real estate certifications.

9. Seattle Mortgage Company, Seattle, WA [Docket No. 05-5021-MR]

Action: Settlement Agreement signed March 28, 2005. Without admitting fault or liability, Seattle Mortgage Company (Seattle Mortgage) agreed to pay HUD an administrative payment in the amount of $21,000.

Cause: The Board took this action based on the following violations of HUD/FHA requirements where Seattle Mortgage: Violated HUD/FHA conflict of interest provisions by paying commissions to a loan officer who originated HUD/FHA-insured loans and who also received 203(k) consultant fees in connection with those loans.

10. Tribeca Mortgage Corporation, Lake Success, NY [Docket No. 04-4367-MR]

Action: The Board voted to impose a civil money penalty on Tribeca Mortgage Corporation (Tribeca) in the amount of $30,000.

Cause: The Board took this action based on the following violations of HUD/FHA requirements in origination of HUD/FHA-insured loans where Tribeca: Originated loans where the borrowers were charged fees in excess of the one percent allowable origination fee for services covered by the origination fee; originated loans without an approved relationship with the HUD-approved sponsor, and/or without being identified as the originating lender when the FHA Case Number was requested; failed to file required annual reports regarding loan origination activity; and failed to maintain and implement an adequate Quality Control Plan in compliance with HUD/FHA requirements.

Dated: April 29, 2005.

John C. Weicher,

Assistant Secretary for Housing-Federal Housing Commissioner.