The Federal Housing Administration late Monday immediately and permanently withdrew lending approvals from Premium Capital Funding of Long Island, a $1 billion a year funder with a government 'claim and default' rate approaching 13%.
A privately owned nonbank, Premium also does business as TopDot Mortgage, which heavily advertised its FHA products, reverse loans, and debt counseling on television and Internet media.
FHA also ended the firm's ability to continue servicing Ginnie Mae securities, transferring Top Dot's $181 million dollar portfolio of receivables to LoanCare Servicing Center.
HUD's Mortgagee Review Board suspended TopDot, citing its "numerous and egregious violations of FHA requirements, including failure to document borrowers' income, evaluate borrowers' creditworthiness, and approving loans with grossly excessive debt-to-income ratios."
Late last week rumors were circulating that TopDot was about to lay off a large chunk of its staff in Long Island. A company manager, requesting his name not be used, took umbrage at FHA's actions, saying TopDot's owners "will fight the action." As of Tuesday, the company was still in business originating Fannie Mae and Freddie Mac loans, said this employee.
He called TopDot a "standup institution," adding that the government took action against the lender "because of all the money we spend marketing [on TV]" which he estimated to be upwards of $400,000 a month.
He blamed the company's default problems on the recession. He also noted that TopDot's employees got wind of the FHA order on Monday just as it was celebrating its 15th anniversary of being in business. "We were not taking advantage of clients at all," he said.
FHA also slapped the company with a fine of $674,000. "This lender demonstrated a pattern of utter disregard for how we do business and its behavior not only put the FHA insurance fund at risk, but placed their own customers at greater risk of foreclosure," said FHA Commissioner David Stevens. Early Monday FHA took action against four lenders.