FHA settles with mortgage lender for improperly refinancing loans
The Federal Housing Administration’s Mortgagee Review Board settled with a Massachusetts mortgage lender that allegedly failed to fully verify whether borrowers could sustain mortgage payments prior to refinancing their loans.
As part of the settlement, First American Mortgage Trust of Brookline, Mass., agreed to pay $72,500 to reimburse FHA for past insurance claims and to indemnify FHA’s insurance fund for any claims to be paid on five mortgages should they default within the next 60 months.
First American declined to comment.
“FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund, but to make certain families can sustain their mortgages,” said Acting FHA Commissioner Bob Ryan. “Due diligence is at the root of mortgage lending protecting lenders, the FHA and certainly homeowners from the prospect of foreclosure.”
Among the alleged violations, the board said the lender refinanced mortgage loans for borrowers with serious credit delinquencies without properly analyzing the households’ ability to manage credit, the release said.
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