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HUD Going After FHA Lenders with High Claim Rates

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Subpoenas have been served to 15 mortgage lenders throughout the country with “significant claim rates” against the FHA mortgage insurance program.

HUD wants the companies to provide documentation and data related to the large number of failed loans that resulted in claims being paid out by the FHA mortgage insurance fund, which as we all know, is on life support.

“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,” said HUD Inspector General Kenneth M. Donohue, in a statement.

“We aren’t making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud.”

The lenders were identified via an analysis of loan data focused on companies with a high number of claims, “certain loan underwriting volume,” and a high ratio of defaults/claims compared to the national average.

“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 move is part of a larger initiative to remove bad players from the FHA system; back in December, Lend America was forced to shut its doors after an FHA suspension.

The following companies were served subpoenas today:

First Tennessee Bank N.A., Memphis, TN
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

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