The Federal Housing Administration permanently withdrew its approval of two mortgage lenders it alleged submitted false information, the U.S. Department of Housing and Urban Development announced Thursday.
HUD’s Mortgagee Review Board, charged with ensuring lenders’ compliance with FHA/HUD regulations, accused Atlanta, Ga.-based RSA Financial Inc. of submitting "false and/or misleading information regarding the criminal conviction and sanction history of its owner and executive, Ramsey Suphi Agan." HUD issued the lender a Notice of Violation on Dec. 4.
Specifically, RSA’s application for lender approval allegedly misled HUD to believe that RSA was properly licensed by the Georgia Department of Banking and Finance and that no company officials had ever been "debarred, sanctioned, fined, convicted, denied approval, or refused a license by any state, federal or local government agency."
According to the housing agency, the lender neglected to divulge that following felony convictions in the 1980s — for bribery and fraud — HUD debarred Agan twice — the second time indefinitely.
After an Oct. 21 Notice of Violation, HUD also permanently withdrew approval Thursday of Houston, Texas-based 1st Alliance Mortgage LLC for numerous alleged violations, including improperly reporting fees and employee compensation, and originating 708 loans from false branch offices using independent contractors who were falsely certified as full-time employees.
According to HUD, the actions of the review board prevent these two lenders from issuing new FHA-insured mortgages or participating in the FHA’s single-family insurance program. The board also imposed a civil penalty of $15,000 on RSA and seeks $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, in a statement. "If any lender can’t operate within FHA’s guidelines, they can’t do business with us."
RSA has 30 days to challenge the FHA’s decision before an administrative law judge, HUD said.
FHA also secured settlements with two other lenders. Franklin First Financial Ltd., a company that Forbes included in its list of "Uncle Sam’s Deadbeat Mortgage Lenders" for its high default ratio, agreed to a civil penalty of $413,500 and to reimburse FHA for any losses on 31 FHA-insured mortgages for up to five years after they were issued.
The company also agreed to repay 78 borrowers for duplicate appraisals and appraisal reviews the company performed for the purpose of selling their mortgages on the secondary market, HUD said.
St. Louis-based Paramount Bond and Mortgage Co. Inc. agreed to pay a civil penalty of $68,500, indemnify HUD of any losses on seven FHA-insured mortgages, and reimburse FHA for $146,397 in insurance claims already paid on two loans, HUD said.
FHA withdrew approval from 28 lenders in 2008, and within the past year the mortgage insurer has stepped up its enforcement and withdrawn approval from 355 lenders, HUD said.
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