FHA Withdraws Approval of Two Mortgage Lenders

The Federal Housing Administration (FHA) cracked down on four mortgage lenders in its single-family mortgage insurance program, which protects lenders from default-related losses on qualifying mortgages. FHA is removing two lenders from its insurance program, and reached agreements with two others on civil penalties. FHA is permanently withdrawing its approval of Atlanta-based RSA Financial and Houston-based 1st Alliance Mortgage. This prevents them from originating and underwriting new FHA-insured mortgages, and from participating in the insurance program and filing claims on losses related to default. The US Department of Housing and Urban Development (HUD) Mortgagee Review Board (MRB) imposed a $15,000 civil penalty against RSA and to is seeking $267,900 from 1st Alliance. “If lenders want to do business with the FHA, it’s critical that they provide complete and truthful information so that we can properly determine who we’re dealing with,” said FHA commissioner David Stevens. “If any lender can’t operate within FHA’s guidelines, they can’t do business with us.” The MRB alleges RSA misleadingly stated it was properly licensed by the Georgia Department of Banking and Finance at the time the company submitted an application to FHA for lender approval. Additionally, the MRB alleges that RSA submitted false or misleading information regarding the criminal conviction and sanction history of its owner and executive, Ramsey Suphi Agan. Specifically, RSA claimed company officials “are neither currently, nor have ever been, debarred, sanctioned, fined, convicted, denied approval, or refused a license by any State, Federal, or local government agency.”  But HUD said it suspended and debarred Agan on at least two occasions and he has two felony convictions. HUD claims 1st Alliance engaged in prohibited branch arrangements, provided false certifications, failed to implement a quality control plan, and committed a number of other violations of HUD/FHA standards. MRB alleges 1st Alliance used independent contractors to originate 708 loans from branch offices that were not true branches of the company and then falsely certified the contractors were full-time employees of the company. The MRB also claims 1st Alliance charged consumers “unallowable, excessive or duplicative loan processing and origination fees” and also failed to list fees paid outside of closing on HUD-1 Settlement Statements. HUD also reached two settlement agreements with FHA-approved lenders to resolve alleged violations of HUD/FHA requirements. New York-based Franklin First Financial agreed to pay a $413,500 civil penalty to HUD, and to compensate HUD for any default-related losses taken on 31 FHA-insured mortgages over the first five years of loan life. The lender also agreed to reimburse 78 borrowers for the cost of duplicate appraisals and appraisal reviews the company performed in order to sell these mortgages on the secondary market. St. Louis-based Paramount Bond and Mortgage also agreed to pay a $68,500 civil penalty to HUD, and to compensate HUD for any default-related losses taken on seven FHA-insured mortgages. The lender will also repay FHA $146,397 in insurance claims already paid on two loans. Write to Diana Golobay.