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Politics & MoneyMortgage

HUD settles with two Texas lenders over mortgage violations

Both permanently withdrawn from FHA approval

The U.S. Department of Housing and Urban Development’s Mortgagee Review Board settled with both American Home Free Mortgage, based in Prosper Texas, and R.H. Lending, based in Colleyville Texas, due to allegations that they violated mortgage regulations.

American Home Free Mortgage (AHFM) allegedly artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager. In addition, HUD alleged that there were multiple quality control and annual certification violations.

Although AHFM agreed to pay a civil money penalty in the amount of $169,419, along with the permanent withdraw of its FHA approval, it did not admit fault or liability with respect to HUD’s allegations.

Meanwhile, in June 2014, the Mortgagee Review Board heard a similar case against R.H. Lending (RHL). 

HUD alleged that the lender had taken part in a scheme to disguise fees charged to borrowers as legitimate construction fees, but for which no work was performed, creating an inflated mortgage for the borrowers and increasing FHA’s exposure to loss. 

Once again, while RHL did not admit fault or liability, it agreed to pay civil money penalties in the amount of $300,000, along with the permanent withdrawal of its FHA approval. 

In addition, HUD banned two of the principal actors in the RHL scheme from doing business with the federal government for a period of seven years. 

The Mortgagee Review Board is in charge of considering evidence brought against FHA-approved lenders for violations of the agency's program requirements.

“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 Helen Kanovsky, HUD’s General Counsel.  “Lenders who engage in business practices that do not conform to generally accepted standards or who act irresponsibly will not be tolerated.”

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