HUD Issues Notice of Violation Against Lend America

October 21, 2009

The U.S. Department of Housing and Urban Development's Mortgagee Review Board today notified Ideal Mortgage Bankers, doing business as Lend America and Lending Key (Ideal), that it has uncovered numerous violations of the Federal Housing Administration's (FHA) origination and underwriting requirements, including submitting false certifications and failing to document the borrower's income and creditworthiness.

HUD also notified four of the company's underwriters that it was suspending and/or proposing debarments for their actions in connection with these violations. Separately, the Department issued pre-penalty notices to these underwriters advising them that the Department is considering imposing civil money penalties against them as well.

Ideal has 30 days to respond to the Board's notice. The individual underwriters have 30 days to oppose their suspensions and/or proposed debarments and to respond to the allegations in the pre-penalty notice.

"Any FHA-approved lender that seeks to do business with us must follow our standards, it's just that simple," said FHA Commissioner David Stevens. "If we determine that our partners are not playing by the rules, they'll cease being our partners. It's not just about protecting the financial health of the FHA insurance fund – this is about protecting each and every family that looks to the FHA for safe and secure mortgage financing."

At HUD's request, the U.S. Attorney for the Eastern District of New York is seeking a temporary restraining order against Ideal to prevent it from originating any new FHA-insured mortgages while federal prosecutors pursue a Civil Fraud Injunction against the Company. The Mortgagee Review Board alleges that Ideal violated the following HUD/FHA requirements by:

1. Using conflicting information in originating and obtaining HUD/FHA mortgage insurance;

2. Submitting false certifications that an employee of the lender obtained directly from the borrower the information contained in the application;

3. Approving loans that did not meet the minimum credit requirements;

4. Failing to adequately document the stability and/or source of income used to qualify mortgage loans;

5. Failing to adequately document the source of funds used to close the loan or satisfy various omitted liabilities;

6. Omitting liabilities from the underwriting analysis without supporting documentation;

7. Approving loans with ratios that exceeded HUD standards without significant compensating factors;

8. Exceeding HUD requirements when calculating the maximum insurable mortgage;

9. Failing to process a loan in accordance with HUD policy on employee loans;

10. Closing a loan with an excessive mortgage broker fee paid to an approved FHA Loan Correspondent;

11. Failing to provide the required documentation to support IMB's decision to approve the mortgage loan;

12. Submitting false certifications to HUD in connection with the submission of its Yearly Verification Report.

The proposed sanctions and penalties against the individual underwriters are based on their approval of mortgages for FHA insurance that contained the same deficiencies listed above. Moreover, HUD alleges that these underwriters falsely certified to the Department that the loans were originated in compliance with FHA requirements and were eligible for FHA mortgage insurance.

Contact ALTA at 202-296-3671 or [email protected].