Following HUD Suit, Allied Gets its FHA Lending Abilities Back—For Now

Federal Housing Administration lending giant Allied Mortgage Corp. will regain its FHA lending privileges—for now. The mortgage company, which was ordered by the federal government to stop originating mortgages as part of a lawsuit against the company and two of its executives for violation of FHA regulations having to do with its branches, fired back with a counter suit against the Department of Housing and Development days later. On Tuesday, a U.S. District judge reversed the decision to suspend the lender.

The original lawsuit, filed November 1, claimed that Allied FHA loans cost the government approximately $834 million in insurance claims. Allied’s suit against HUD asked for its lending privileges back, claiming that the suspension would amount to job losses in the hundreds as well as losses for borrowers already going through the FHA loan process with Allied.

“The potential destruction of plaintiffs’ business outweighs any harm that would be suffered by the government before the issues can be litigated,” wrote Judge Melinda Harmon in the U.S. District Court of Southern Texas on Tuesday.

The HUD suit alleges that Allied originated FHA home loans from unapproved branch offices in violation of FHA requirements and later covered up the violations through the submission of false information. Among the company’s violations, which included false certification, failure to ensure that its corporate entity paid the operating expenses of its FHA-approved branch offices and failure to implement a quality control plan in compliance with HUD/FHA, the company submitted false information about where its loans were originated.

The company originated 133 reverse mortgages in 2010 and has originated 66 reverse mortgage loans to date this year, according to data from ReverseBase.

Written by Elizabeth Ecker

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