HUD's mortgagee review board came to settlement agreements with 12 mortgage lenders during the third fiscal quarter of 1994, two settlements shy the number of settlements registered during the previous quarter. But the board's activity is slightly off the torrid pace it set in fiscal year 1993.
HUD took the administrative action based on referrals from its monitoring division, and proposed settlements range from a $10,000 civil money penalty for one FHA lender to letters of reprimand and $500 civil money penalties for three others.
Among the more severe administrative actions taken by HUD includes a settlement agreement with Interstate Plus Mortgage Inc., of San Diego. According to HUD, a monitoring review revealed Interstate allegedly failed to report loan fraud by a former loan officer, then funded the loan packages after learning of fraudulent practices.
HUD also said an Interstate loan officer allegedly accepted kickbacks from loan brokers. As part of the proposed settlement, will cancel the FHA insurance on the nine improperly originated loans and Interstate will institute a corrective action plan.
Other alleged violations and settlements included:
* Independence Mortgage Corp. of America, Winter Park, Fla., for alleged failure to: Conduct face-to-face interviews with mortgagors; failure to verify down payments, and failure to verify and analyze mortgagors' assets, liabilities and income. Hud's proposed settlement includes indemnification for claim losses of 10 improperly originated loans.
* Home Mortgage Co., doing business as Puerto Rico Home Mortgage, Hato Rey, P.R., for alleged: Untimely quality control reviews; deduction of late fees from mortgagors escrow accounts prior to existing surpluses; and failure to perform management reviews prior to foreclosure. HUD's proposed settlement includes a $10,000 civil money penalty, refunds to mortgagors for unallowable post endorsement fees and continued implementation of corrective actions.
HUD also agreed to proposed settlements with two lenders, First Guaranty Financial Corp., Lake Elsinore, Calif., and Lane Mortgage Co., Lynwood Colo., which includes indemnification for one improperly originated loan each, plus civil money penalties of $1,000 and $500, respectively. HUD also reached proposed agreements with five other lenders, including: Discount Financial Corp., Longwood, Fla.; Federated Mortgage Co., West Covina, Calif.; Mortgage Associates, Lakeland, Fla.; Continental Capital Corp., Huntington Station, N.Y.; and All Kern Financial Corp., Bakersfield, Calif.
The number of settlement arrangements the board has reached is down from fiscal year 1993 the board, chaired by FHA Commissioner Nicholas P. Retsinas, reviewed 135 cases of lender misconduct in FY 1993, and has settled with more than 100 FHA lenders over a two-year period. Those cases resulted in $16.8 million recovered or saved in insurance claim losses, and $209,000 in civil money penalties imposed.
With 30 settlements through two fiscal quarters in 1994, HUD's pace would place its total settlement activity for FY 1994 at about 45. Some mortgage market analysts speculate with HUD's legislative and regulatory agendas in overdrive, the board cannot scrutinize FHA lenders as closely as they had previously, thus the lower numbers.
But others, in showing the total settlement projections would put HUD off by just over 10 settlements for the year, believed the somewhat slower activity is a result of improved HMDA reporting by FHA lenders. A HUD official wouldn't discount either possibility. "Last year we saw a large number of referrals, but that number has dropped this year - probably because lenders are becoming more concious of the HMDA reporting requirements," he said. but, he added, HUD's heavy regulatory and legislative agenda has also gotten in the way. "That's always a factor, absolutely," he said.
