The US Department of Housing and Urban Development (HUD) launched an initiative to review Federal Housing Administration (FHA) approved mortgage lenders with high foreclosure rates. In a conference call held Jan. 12, Kenneth Donohue, the HUD inspector general, and David Stevens, the FHA commissioner, announced an initiative focusing on mortgage companies holding “significant” claim rates for the Federal Housing Administration mortgage insurance program. HUD Office of Inspector General (OIG) served subpeonas to the offices of 15 mortgage companies across the country to gather documents and data on failed loans paid-out by the FHA mortgage insurance fund. The institutions had at least 1,000 FHA mortgages, were spread across the country and ranged in size. “We will conduct an investigation if appropriate to determine who is responsible and recommend that appropriate action be taken against individuals and corporations. My office identified these direct-endorsement companies from an analysis of loan data focusing on companies with a large number of claims, loan underwriting volume, a high ratio of default,” Donohue said in the conference. Alarmed by the amount of claims against the FHA insurance fun by a number of poor performing companies, Stevens prompted the initiation. “We are taking risk management extremely seriously,” Stevens said in the press release. “In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General’s initiative will help us determine whether there is fraud and better manage risk in the long run.” Possible actions the HUD OIG could take are: audits, investigations, inspections and evaluations. “The FHA market share has skyrocketed,” Donohue said. “Our job is oversight.  We work for the American taxpayer.  Each loan on this list will be thoroughly examined and we will track down the reasons why it failed.  Once we determine the causes, we will look to see whether there is a need for further review or remedial action.  We want to send a message to the industry that as the mortgage landscape has shifted we are watching very carefully and that we are poised to take action against bad performers.” The companies are:
  • First Tennessee Bank, Memphis, TN
  • Alethes, Lakeway, TX
  • Security Atlantic Mortgage Co., Edison, NJ
  • Pine State Mortgage Corporation, Atlanta, GA
  • Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
  • Alacrity Financial Services, Southlake, TX
  • Assurity Financial Services, Englewood, CO
  • D and R Mortgage Corporation, Farmington, MI
  • Webster Bank, Cheshire, CT
  • Mac-Clair Mortgage Corporation, Flint, MI
  • Americare Investment Group, Inc., Arlington, TX
  • 1st Advantage Mortgage, Lombard, IL
  • American Sterling Bank, Independence, MO
  • Sterling National Mortgage Company, Great Neck, NY
  • Dell Franklin Financial, Columbia, MD
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