A report from the Department of Housing and Urban Development's inspector general says deficiencies in some of Webster Bank's Federal Housing Administration underwriting practices could cost the FHA upward of $500,000 on six loans.
The inspector general reviewed 20 FHA mortgages underwritten by the $17 billion-asset bank, a unit of Webster Financial Corp. of Waterbury, Conn. It found problems with its employment verification practices, down-payment gift documentation work and other items.
Thursday morning the bank issued a statement to National Mortgage News that said each of the six loans in question was originated through its national wholesale group, which it shut down more than two years ago.
The bank said that the loans "complied with all HUD guidelines" and that it will defend itself "vigorously."
Webster added that any action taken against it will not hurt its ability to originate and sell FHA-insured loans. (It appears many of the loans reviewed by the inspector general are more than two years old. All are in claim status.)
The government's review was conducted by the inspector general's office, whose Operation Watchdog initiative is reviewing the underwriting practices of 15 direct endorsement lenders.
The office said it found that "Webster Bank officials did not underwrite 6 of 20 loans reviewed in accordance with HUD/FHA regulations. As a result, the FHA insurance fund suffered actual losses of $456,854 on five loans and faces potential loss of $60,136 on one loan for a total of $516,990."
The inspector general is recommending that the agency take administrative action against the bank and that it assess civil money penalties.
