[Update 2: Reflects Fitch’s, Moody’s rating outlook negative] The Federal Housing Administration (FHA) on Tuesday suspended Ocala-based Taylor, Bean & Whitaker Mortgage Corp. (TBW) from originating and underwriting new FHA-insured mortgages, resulting in a negative rating watch on its residential servicer ratings. At the same time, Ginnie Mae terminated TBW’s status as an issuer in its mortgage-backed securities (MBS) program and as a servicer of its securities. Effective immediately with the announcement, Ginnie takes on TBW’s nearly $25bn Ginnie portfolio. “TBW failed to provide FHA with financial records that help us to protect the integrity of our insurance fund and our ability to continue a 75-year track record of promoting, preserving and protecting the American Dream,” said FHA commissioner David Stevens. Stevens added: “We were also troubled that the Company not only failed to disclose it was a target of a multi-state examination and a separate action by the Commonwealth of Kentucky, but then falsely certified that it had not been sanctioned by any state. FHA won’t tolerate irresponsible lending practices.” HousingWire reported in June that TBW agreed to pay out $9m after the conclusion of a multi-state regulator examination of its ’06 originations of non-traditional mortgages — including interest-only, pay-option and stated income loans — a now-shuttered practice at the company. In addition to instances of potential overcharging of fees to consumers, the state examinations unveiled possible issues in the submission stage by brokers where mortgage applications were submitted multiple times until the automatic underwriting system accepted them. Following FHA’s announcement on the suspension, Fitch Ratings placed TBW’s residential servicer ratings on negative watch pending an ongoing investigation. The ratings currently hold at ‘RPS3+’ but may face downgrades depending on results of the investigation. The ratings agency rates servicers from 1 to 5 with 1 ranking the highest. Moody’s Investors Service also placed TBW’s servicer quality rating on watch for possible downgrade. The US Department of Housing and Urban Development (HUD) said in a statement that TBW’s immediate suspension remains temporary during the completion of an investigation by HUD’s Office of Inspector General, an ongoing review by the Department’s Office of Housing and any legal actions that may follow the review. “Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world — operate within our standards or we won’t do business with you,” said HUD secretary Shaun Donovan. HUD also sent notices of proposed debarment to TBW’s CEO Paul Allen and president Ray Bowman. They have 30 days to contest the proposed debarments, which allege submission of false and misleading information to both HUD and Ginnie. TBW is the third largest direct endorsement lender of FHA-insured loans and the eighth largest issuer of Ginnie Mae MBS, according to HUD. It’s also one of the top 10 national wholesale mortgage lenders, according to company statements, meaning it funds loans originated by third-party brokers. TBW did not return requests for comment before this story went to press. Write to Diana Golobay.

More: