The $1.2 million in fines HUD slapped against 13 mortgage lenders for irregular lending practices may seems mild if HUD enforces a "death penalty' provision in the Government-Sponsored Enterprises Act.

The GSE Act, passed last October, allows the Office of Federal Housing Enterprise Oversight "to take certain administrative actions against lenders who have violated certain statutes," said MikesFerrell, senior staff vice president and legislative counsel for the Mortgage Bankers Association of America. This includes barring them from dealing with Fannie Mae and Freddie Mac. That could prove deadly for some lenders, depending on how Aida Alvarez. oversight office director, enforces the rule. A secondary market sentence could prove fatal to many of these businesses-1 25 have already been penalized by the review board in 1993 - because they're so heavily reliant on Fannie and Freddie to move their mortgage producls. Based on calculations using figures from the MBA's national delinquency survey, FHA-type business equals about 25% of the secondary market volume.

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