Three Lenders Shut out of FHA
The Federal Housing Administration (FHA) program that insures lenders against default-related losses on Wednesday saw another three approved lenders get the boot. The US Department of Housing and Urban Development suspended three FHA lenders suspected of "serious violations" of HUD's regulations, marking the first action to clean up the ranks of FHA lenders since taking the ax to more than 100 approvals in late May. The three lenders -- Golden First Mortgage Corp., Great County Mortgage Bankers and Beneficial Mortgage Corp. -- are now prohibited from originating FHA-insured mortgages until HUD completes its investigation. HUD took the action "to protect the financial soundness of FHA's insurance fund," according to a media statement. HUD alleges that Golden First failed to notify it of an investigation by the Office of Thrift Supervision (OTS) into the business practices of Golden First's president. HUD took action against the San Juan-based Beneficial, claiming it failed to notify HUD or FHA of sanctions imposed by the Puerto Rico Financial Institutions' Commissioner's Office related to mortgage servicing practices. Great Country faces suspension over a body of evidence gathered by HUD that the lender violated multiple HUD/FHA requirements, including failure to implement a quality control plan, to disclose business affiliations with real estate and title service providers and to verify credit information in 55 FHA mortgage loans reviewed by HUD. HUD's actions against the three lenders represent the latest effort to reform mortgage lending. The suspensions come in the wake of news out of the department that consumers filed a record 10,552 fair housing discrimination complaints in fiscal year 2008. In light of new legislation, HUD might bring more action against lenders in such cases. FHA also enjoys a bit more authority since President Obama signed the Helping Families Save Their Homes Act, which gives the program the enforcement tools to better police FHA lenders suspected of misleading tactics or fraudulent practices. Write to Diana Golobay.