[1]HUD [2]'s Mortgagee Review Board [3] (MRB) announced [4] settlement agreements of two Texas mortgage lenders on Monday.
According to HUD, American Home Free Mortgage, LLC [5] (AHFM) and R.H. Lending were allegedly in violation with the Federal Housing Administration (FHA) rules and were "engaged in a scheme to charge bogus fees to consumers, which improperly inflated mortgages for borrowers purchasing newly constructed manufactured housing."
The MRB considers evidence brought against FHA-approved lenders for violations of the agency's program requirements, HUD noted. The Board can withdraw a lender's FHA approval so that the lender cannot participate in FHA programs for serious violations. In less serious cases, the Board enters into settlement agreements with lenders to bring them into compliance.
The Board can also impose civil money penalties, enter into settlements with administrative payments, place lenders on probation, suspend their FHA approval, or issue letters of reprimand.
Among the 11 alleged violations of the FHA's rules, the MRB claimed Prosper, Texas- based American Home Free Mortgage, "artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager."
HUD also alleged that there were multiple quality control and annual certification violations within AHFM.
With respect to HUD's allegations, AHFM did not admit fault or liability, HUD says.
The agreement outlined that AHFM would pay a civil money penalty in the amount of $169,419 and agree to permanently withdraw its FHA approval.
“FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund, but to make certain families can sustain their mortgages,” said Helen Kanovsky, HUD’s general counsel. “Lenders who engage in business practices that do not conform to generally accepted standards or who act irresponsibly will not be tolerated.”
This is not the first time that the MRB has dealt with lenders allegedly violating FHA rules.
In June 2014, the MRB heard a similar case against R.H. Lending, Inc [6].,(RHL), of Colleyville, Texas. Multiple underwriting violations by RHL of manufactured home loans were considered by the Board.
HUD alleged that the lender had "taken part in a scheme to disguise fees charged to borrowers as legitimate construction fees, but for which no work was performed, thus creating an inflated mortgage for the borrowers and increasing FHA’s exposure to loss."
RHL did not admit fault or liability, HUD says.
RHL agreed to pay civil money penalties in the amount of $300,000 and to the permanently withdraw its FHA approval. HUD also debarred two of the principal actors in the RHL scheme from doing business with the Federal Government for a period of seven years.