HUD intensified its scrutiny of FHA/VA lenders again in the third quarter when it announced that it had suspended one lender from HUD deals and taken action against 13 others identified by the Mortgagee Review Board, signaling a pursuit of HMDA compliance that might have some mortgage bankers wincing.
The 14 lenders identified by the HUD board brings the 1993 total to 139, the most settlements agreed to by HUD ever. For many bankers, the timing of the increased attention to Home Mortgage Disclosure Act data and the emergence of HUD Secretary Henry Cisneros as the champion of fair lending is no coincidence.
During the Mortgage Bankers Association conference in Chicago, new MBA President Stephen Ashley told lenders from around the country that he believed Cisneros would be vigilant in his pursuit of fair lending practices. His thoughts were echoed by MBA Executive Vice President Warren Lasko, although he questioned the reliability of the HMDA data.
The board reached settlement agreements with 9 of 14 lenders and issued letters of reprimands to four others. The one remaining case involving Logan-Laws Financial Corp., a small lender in Johnson City, Tenn., is destined for the courts and HUD has issued a suspension of Federal Housing Administration Title I lending approval for it.
HUD said the suspension was levied because of alleged false documents to the department in connection with Title I claims for insurance benefits and an ongoing FBI investigation concerning the company's handling of Title I claims.
"Their [HUD] reasons for the suspension are unfounded," said Ramon Sanchez-Vinas, chief executive officer of Logan-Laws Financial Corp. "And I believe that the suspension won't take affect until after the investigation is completed."
Sanchez-Vinas said that the investigation into Logan-Laws began July 26. HUD was also unable to provide more information on the case, other than the limited explanation released by the Mortgagee Review Board.
The other lenders were identified by HUD for a variety of causes including issuing FHA insurance on ineligible properties; submitting of false information to HUD; failing to implement quality control plans, and; advising borrowers that loan proceeds could be used for ineligible purposes.
One of those companies, TRI Capital Corp., the nation's largest FHA multifamily lender, was identified by HUD for having approved three multifamily mortgages deemed ineligible for HUD/FHA mortgage insurance because they offered transient or hotel-type services, and approving 10 multifamily mortgages in 1988 that exceeded maximum insurable loan amounts. But TRI Capital questioned HUD's review methods.
"They claimed that there was over-mortgaging of coinsured loans and loans made about five to six years ago," said TPI Capital President John Sweazey, who added that HUD felt loans exceeded the 85% of the loan-to-value ratio requirement.
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