August 11, 2015
A press release on the FHA/HUD official site announces HUD action against two Texas-based lenders. HUDNo.15-102, published Monday August 10, 2015, states:
“The U.S. Department of Housing and Urban Developments Mortgagee Review Board (MRB) today announced settlement agreements with two Texas mortgage lenders following allegations they engaged in a scheme to charge bogus fees to consumers, which improperly inflated mortgages for borrowers purchasing newly constructed manufactured housing.”
11 violations of FHA lending rules were alleged in the case. According to the press release, the HUD Mortgage Review Board claims, “American Home Free Mortgage, LLC (AHFM) of Prosper, Texas, 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.”
The release says AHFM agreed to “pay a civil money penalty in the amount of $169,419 and agreed to the permanent withdraw of its FHA approval.” The company does not “admit fault or liability with respect to HUDs allegations” according to the release.
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, HUDs General Counsel in the press release, who adds, Lenders who engage in business practices that do not conform to generally accepted standards or who act irresponsibly will not be tolerated.
FHA loan rules state that lender cannot artificially increase costs through exaggerated, illegitimate, or disallowed fees/expenses.
The FHA/HUD press release also mentions a second case. “In June 2014, the Mortgagee Review Board heard a similar case against R.H. Lending, Inc.,(RHL), of Colleyville, Texas. The Board considered multiple underwriting violations by RHL of manufactured home loans. RHL agreed to pay civil money penalties in the amount of $300,000 and to the permanent withdrawal of its FHA approval.”
In this instance, HUD claims that the lender in question had “taken part in a scheme to disguise fees charged to borrowers as legitimate construction fees, but for which no work was performed, thus creating an inflated mortgage for the borrowers and increasing FHAs exposure to loss.”
HUD debarred two of the principal actors named in the case from doing business with the Federal Government for seven years.
Do you have questions about FHA loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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