HARRISBURG, PA-Taylor, Bean & Whitaker Mortgage Corp. will modify loans for struggling homeowners and pay $9 million in fines as part of a settlement with the Pennsylvania Banking Department and 13 state mortgage regulators.

The agreement comes as the result of a multistate examination of nontraditional mortgages originated by TBW in 2006. The review uncovered numerous instances in which applicants' incomes and assets were altered in order to gain loan approvals, said Pennsylvania secretary of banking Steve Kaplan. Alleged practices included the multiple submissions of loan applications by third-party originators through automated underwriting programs resulting in altered income and asset information for prospective borrowers in order to qualify applicants for mortgages. "Concern over these practices prompted TBW to stop offering nontraditional mortgages in early 2007 and to make changes to its internal control processes," he said.

As part of the settlement, the Ocala, Fla.-based company must implement a mod program for loans held in its investment portfolio that will conform to the Making Home Affordable program. The lender must also put in place a comprehensive compliance program to be reviewed and approved by the state mortgage regulators. Mortgages are eligible for a mod if the amount owed on the first mortgage is equal to or less than $729,750 and the mortgage was closed before Jan. 1, 2009.

Other state/local regulators participating in the settlement include Arizona, Florida, Georgia, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, North Carolina, Vermont, and Washington, D.C. The fines will assist states' mortgage industry oversight. Half of the funds will go to ongoing development and maintenance of the Nationwide Mortgage Licensing System.

TBW originated 215,880 traditional and nontraditional mortgages nationally between 2006 and 2007. The company stopped offering such nontraditional mortgages in 2007. It is the first of several companies being examined by a group of state mortgage regulators to evaluate underwriting standards and risk management practices.

The Georgia Department of Banking and Finance said an independent firm is going to be hired to review TBW's nontraditional mortgages originated from 2006 to 2007 to determine whether additional reimbursement to consumers is warranted.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.