A Houston mortgage brokerage with 200 branches nationwide said it agreed to pay a $38,000 fine to settle alleged violations of Federal Housing Administration branching rules.

Allied Home Mortgage Capital Corp. of Texas has a monthly production run rate of up to $250 million, with 60% of its originations FHA-insured.

Acting on a tip, auditors from the Department of Housing and Urban Development Inspector General's office found that Allied had required branch managers at five sites to make contractual arrangements for office leases, equipment contracts and utilities. HUD says Allied did not consistently pay branch expenses.

"Further, in one instance, Allied requested that a former employee use personal funds to cover branch operating losses," the February 2009 HUD IG audit says.

FHA-approved lenders and brokerages are required to pay all branch office expenses.

Allied disagreed with the IG's findings and gave HUD supporting documentation, except for a "small number of accounting records for the five branch locations," the company said. It agreed to the $38,000 civil money penalty.

"We are pleased to put this issue to rest," said Allied CEO Jim Hodge. "We believe this is an equitable settlement and any problems have been remedied to prevent this from reoccurring."

The brokerage is affiliated with Allied Home Mortgage Corp., a Fannie Mae and Freddie Mac seller/servicer.

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