US housing agency subpoeanas 15 FHA mortgage lenders

January 12, 2010

WASHINGTON, Jan 12 (Reuters) – Housing and Urban Development Inspector General Kenneth M. Donohue and Federal Housing Administration Commissioner David Stevens on Tuesday announced that 15 FHA-approved lenders have been subpoenaed to question why so many of their loans are going into default.

The lenders, including a unit of First Horizon National Corp. are in the sights of the U.S. authorities for questionable underwriting practices on loans backed by the government.

Donohue said the “initiative” was not an investigation and said his office was not yet making any accusations of wrongdoing.

“The goal of this initiative is to determine why there is such a high rate of defaults and claims with these companies and whether there is wrongdoing involved,” Donohue said.

HUD said the probe is focused on corporate offices rather than individual branch offices and could serve as a starting point for more detailed reviews if abuses are uncovered.

“We are taking risk management extremely seriously,” said Stevens, “we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA.”

Since the financial crisis began in late 2007, hundreds of thousands of homes have been lost and many more are on the verge of being foreclosed this year and next.

The federal government has been increasing its oversight of FHA-approved lenders in recent months as FHA lenders increase their share of the overall mortgage market. The FHA insures nearly 30 percent of all purchase mortgages and 20 percent of refinanced loans.

Last month, Equitable Trust Mortgage Corp agreed to pay $277,000 in fines after the FHA suspended it for charging unauthorized fees to minorities on government-backed home loans.

The FHA has also suspended Lend America for violating its underwriting guidelines. The firm is now out of business and under investigation by both HUD and the Justice Department.

Another lender, Taylor Bean & Whitaker, filed for bankruptcy after the FHA suspended its status in August.

The companies being questioned are First Tennessee Bank N.A., Memphis, TN, a unit of First Horizon National Corp; Alethes LLC, Lakeway, TX; Security Atlantic Mortgage Co., Edison, NJ; Pine State Mortgage Corporation, Atlanta, GA; Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI; Alacrity Financial Services, LLC, Southlake, TX; Assurity Financial Services, LLC, 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 Inc., Great Neck, NY; Dell Franklin Financial LLC, Columbia, MD. (Reporting by Corbett B. Daly; Editing by Theodore d’Afflisio) ((corbett.daly@thomsonreuters.com; +1-202-898-8395; Reuters Messaging: corbett.daly.thomsonreuters.com@reuters.net))

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