[Federal Register Volume 61, Number 86 (Thursday, May 2, 1996)]
[Notices]
[Pages 19631-19633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10845]



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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4051-N-01]


Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner; Mortgagee Review Board Administrative Actions

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: In compliance with Section 202(c) of the National Housing Act, 
notice is hereby given of the cause and description of administrative 
actions taken by HUD's Mortgagee Review Board against HUD-approved 
mortgagees.

FOR FURTHER INFORMATION CONTACT: William Heyman, Director, Office of 
Lender Activities and Program Compliance, 451 Seventh Street, S.W., 
Washington, D.C. 20410, telephone (202) 708-1515 (this is not a toll-
free number). Hearing- or speech-impaired individuals may access this 
number by calling the Federal Information Relay Service TTY at 1-800-
877-8339.

SUPPLEMENTARY INFORMATION: Section 202(c)(5) of the National Housing 
Act (added by Section 142 of the Department of Housing and Urban 
Development Reform Act of 1989 (Pub.L. 101-235), approved December 15, 
1989, requires that HUD ``publish in the Federal Register a description 
of and the cause for administrative action against a HUD-approved 
mortgagee'' by the Department's Mortgagee Review Board. In compliance 
with the requirements of Section 202(c)(5), notice is hereby given of 
administrative actions that have been taken by the Mortgagee Review 
Board from October 1, 1995 through March 31, l996.

1. Associate Trust Financial Services; Camp Springs, Maryland

    Action: Proposed withdrawal of HUD-FHA mortgagee approval.
    Cause: Alleged submission of false information to the Department in 
connection with three HUD-FHA insured mortgage loan transactions.

2. Directors Mortgage Loan Corporation/Norwest Mortgage, Inc.; Des 
Moines, Iowa

    Action: Settlement agreement that includes indemnification to the 
Department for any claim losses in connection with 56 improperly 
originated FHA insured mortgages; payment of a civil money penalty in 
the amount of $56,000; and an independent CPA review in the future to 
determine compliance with the HUD-FHA Section 203(k) program 
requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
Section 203(k) program requirements by Directors Mortgage Loan 
Corporation, which was subsequently purchased by Norwest Mortgage, Inc. 
The violations included: calculating maximum mortgage amounts using a 
purchase contract that did not reflect the true purchase price; 
violating the seven unit limitation; improperly adding mortgage 
payments in the property rehabilitation cost; failure to perform field 
reviews of appraisals involving investor loans; permitting the seller 
to loan the required investment for the benefit of the mortgagor; 
miscalculating maximum mortgage amounts by failing to deduct seller 
concessions from the purchase price; and permitting loans to close that 
contained alleged false statements.

3. The Money Store; Sacramento, California

    Action: Settlement agreement that includes: cancellation of HUD-FHA 
insurance in connection with six improperly originated Title I loans; 
payment to the Department in the amount of $35,000; and a future review 
by a CPA or other independent party to determine compliance with HUD-
FHA Title I program requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
Title I property improvement loan program requirements that included: 
failure to properly service Title I loans; failure to timely submit 
insurance claims; and failure to timely report the sale of Title I 
notes and transfers of insurance reserves.

4. Empire Funding Corporation; Austin, Texas

    Action: Settlement agreement that includes: cancellation of HUD-FHA 
insurance in connection with seven improperly originated Title I loans; 
indemnification for the Department's claim loss on one improperly 
originated Title I loan; payment of a civil money penalty in the amount 
of $13,000; and corrective action to assure compliance with HUD-FHA 
requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
Title I property improvement loan program requirements that included: 
accepting falsified completion certificates; alleged falsified lender 
inspection reports; failure to resolve borrower complaints; permitting 
dealers to participate without regard to performance; and failure to 
report dealer irregularities.

5. TMI Financial, Inc.; Austin, Texas

    Action: Settlement agreement that includes a voluntary exclusion 
from participation in the HUD-FHA Title I property improvement loan 
program for a period of one year and a civil money penalty of $132,000.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
Title I property improvement loan program requirements that included: 
submitting alleged false insurance claims; accepting falsified 
completion certificates; alleged falsified lender inspection reports; 
failure to resolve borrower complaints; and failure to report dealer 
irregularities.

6. New England Mortgage Brokers, Inc.; North Andover, Massachusetts

    Action: Settlement agreement that includes: payment to the 
Department of a civil money penalty in the amount of $3,000; corrective 
action to assure compliance with HUD-FHA

[[Page 19632]]

requirements; and a future review by an independent CPA to determine 
compliance with HUD-FHA requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements that included: failure to implement an adequate Quality 
Control Plan; failure to perform quality control reviews of loan 
correspondents; permitting non-exclusive employees to originate HUD-FHA 
insured mortgages; failure to conduct face-to-face interviews with 
mortgagors; and paying a referral fee to an independent contractor.

7. State Funding, Inc.; Orange, California

    Action: Probation and a civil money penalty in the amount of 
$10,000.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements that included: failure to implement and maintain a Quality 
Control Plan for the origination of HUD-FHA insured mortgages; failure 
to remit Up-Front Mortgage Insurance Premiums within 15 days from the 
date of loan closing and to remit late charges and interest penalties; 
establishing subordinate notes in originating HUD-FHA streamline 
refinances; and failure to timely submit loans for endorsement.

8. Calcorp Finance, Inc.; Bell, California

    Action: Settlement agreement that includes: indemnification to the 
Department in connection with three improperly originated mortgages; 
and corrective action to assure compliance with HUD-FHA requirements.
    Cause: A HUD monitoring review that cited violations of HUD-FHA 
requirements that included: failure to conduct face-to-face interviews 
with borrowers; submitting alleged false information to HUD-FHA; and 
failure to close loans in the company's name.

9. Pacific Inland Mortgage Corporation; Anaheim Hills, California

    Action: Settlement agreement that includes: indemnification to the 
Department for any claim losses in connection with two improperly 
originated loans; payment of a civil money penalty in the amount of 
$1,000; and corrective action to assure compliance with HUD-FHA 
requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: failure to implement a Quality Control Plan for 
the origination of HUD-FHA insured mortgages; submission of alleged 
false information to HUD-FHA; and permitting borrowers to sign loan 
documents in blank.

l0. Western Fidelity Mortgage Company; Salt Lake City, Utah

    Action: Settlement agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: failure to comply with reporting requirements 
under the Home Mortgage Disclosure Act (HMDA); and failure to implement 
an adequate Quality Control Plan for the origination of HUD-FHA insured 
mortgages.

11. First American Mortgage Company; Sulphur Springs, Texas

    Action: Settlement agreement that includes: indemnification to the 
Department for claim losses in connection with two improperly 
originated loans; and corrective action to assure compliance with HUD-
FHA requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: failure to perform face-to-face interviews with 
borrowers; permitting borrowers to handcarry verifications of 
employment; and failure to implement a Quality Control Plan.

12. Seacoast Equities, Inc.; La Mesa, California

    Action: Probation and payment of a civil money penalty in the 
amount of $25,000.
    Cause: Failure to comply with the terms of a Settlement Agreement 
with the Mortgagee Review Board with respect to the use of false and 
misleading advertising in connection with the HUD-FHA Title I property 
improvement loan program.

13. American Mortgage Professionals; Escondido, California

    Action: Settlement agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: Use of false and misleading advertising in connection with 
the HUD-FHA Title I program.

14. Classic Financial Corporation; Tustin, California

    Action: Settlement agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: Use of false and misleading advertising in connection with 
the HUD-FHA Title I program.

15. Interbank Funding Group; San Diego, California

    Action: Settlement agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: Use of false and misleading advertising in connection with 
the HUD-FHA Title I program.

16. Mortgage America Nationwide; Grand Terrace, California

    Action: Settlement agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: Use of false and misleading information in connection with 
the HUD-FHA Title I program.

17. Unifed Mortgage Corporation; San Diego, California

    Action: Settlement agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: Use of false and misleading advertising in connection with 
the HUD-FHA Title I program.

18. Z and Z Funding Group; San Diego, California

    Action: Settlement Agreement that includes: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.

19. K Mortgage Corporation; Wall Township, New Jersey

    Action: Settlement Agreement that includes: indemnification and/or 
buydown of mortgage amounts of three overinsured mortgages; 
indemnification for any claim loss for one improperly originated 
mortgage; refunds to borrowers of excessive discount points; and 
payment of a civil money penalty of $500.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: originating HUD-FHA insured mortgages prior to 
obtaining the required branch office approvals; failure to implement 
and maintain an adequate Quality Control Plan; using an identity of 
interest closing agent; closing loans that exceed HUD-FHA maximum 
mortgage amounts; unallowable credits to the borrowers for repairs; 
charging the borrowers excessive discount points;

[[Page 19633]]

failure to determine the source of funds required for closing; and 
failure to give full credit for an earnest money deposit.

20. Davis-Penn Mortgage Company; Houston, Texas

    Action: Settlement Agreement that includes: payment to the 
Department of a civil money penalty in the amount of $8,000; and 
submission of acceptable rental use agreement with respect to two 
multifamily projects.
    Cause: Violation of HUD-FHA multifamily mortgage insurance program 
requirements resulting from improperly accepting payment in full of two 
multifamily project mortgages without obtaining the prior approval of 
HUD-FHA.

21. MP Inc. d/b/a Mortgage Professionals; Irvine, California

    Action: Settlement Agreement that would include: payment of a civil 
money penalty in the amount of $2,000; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: Use of false and misleading advertising in connection with 
the HUD-FHA Title I program.

22. Mortgage America Nationwide; Grand Terrace, California

    Action: Settlement Agreement that includes: indemnification to the 
Department for any claim losses in connection with two improperly 
originated loans; payment of a civil money penalty in the amount of 
$500; and corrective action to assure compliance with HUD-FHA 
requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: failure to implement and maintain an adequate 
Quality Control Plan; approval of an ineligible borrower for an insured 
loan; failure to properly verify the source and/or adequacy of the 
funds to close; originating a loan that exceeded HUD-FHA maximum 
mortgage amount; and failure to accurately reflect all charges to the 
buyers and sellers on the HUD-1 Settlement Statement.

23. Statewide Mortgage Company; Houston, Texas

    Action: Proposed Settlement Agreement that would include: 
indemnification to the Department for any claim losses in connection 
with 35 improperly originated Title I property improvement loans; 
corrective action to assure compliance with HUD-FHA requirements; and a 
future review by an independent CPA to determine compliance by the 
company's Bellevue, Washington branch office with HUD-FHA Title I 
program requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
Title I program requirements including: failure to conduct a face-to-
face or telephone interview with the borrowers; approving loan 
applicants based on alleged false leases; failure to present the Title 
I loan proceeds directly to the borrowers; alleged falsified property 
inspection reports; failure to establish required equity; and reporting 
loans for insurance that contained inaccurate information.

24. Alliance Mortgage Corporation; Villa Park, Illinois

    Action: Proposed Settlement Agreement that would include: 
indemnification to the Department for any claim losses in connection 
with six improperly originated loans; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: A HUD Office of Inspector General audit report that 
disclosed violations of HUD-FHA requirements including: failure to 
conduct face-to-face interviews with mortgagors; failure to properly 
verify borrowers' gift funds; failure to properly verify borrower's 
income; understating a borrower's liabilities; and failure to maintain 
an adequate Quality Control Plan.

25. American City Mortgage Corporation; Carson, California

    Action: Settlement Agreement that includes: indemnification to the 
Department for any claim losses in connection with 10 improperly 
originated loans; payment of a civil money penalty in the amount of 
$7,000; and corrective action to assure compliance with HUD-FHA 
requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: submitting loans involving ``strawbuyers'' to 
HUD-FHA for mortgage insurance; using alleged false information in 
originating HUD-FHA insured mortgages; failure to conduct face-to-face 
interviews with mortgagors; failure to document borrower's source of 
funds used for downpayment and closing costs; deleting a mortgagor from 
the title in a Rate Reduction Refinance transaction; submitting a 
defaulted loan to HUD-FHA for mortgage insurance endorsement; 
submitting loans to HUD-FHA for insurance endorsement that were 
overinsured; failure to properly implement a Quality Control Plan; 
failure to properly underwrite loans submitted by Loan Correspondents; 
and closing loans submitted by Loan Correspondents in the company's own 
name.

26. Home Federal Savings Bank; Cleveland, Ohio

    Action: Proposed Settlement Agreement that would include 
indemnification to the Department for any claim losses in connection 
with 21 improperly originated loans.
    Cause: Violation of HUD-FHA requirements by a former employee that 
included failure to perform face-to-face interviews with borrowers; and 
submission of false information to the Department.

27. Western States Mortgage Corporation; Bellevue, Washington

    Action: Settlement Agreement that includes: payment of a civil 
money penalty in the amount of $500; and corrective action to assure 
compliance with HUD-FHA requirements.
    Cause: A HUD monitoring review that disclosed violations of HUD-FHA 
requirements including: failure to implement and maintain an adequate 
Quality Control Plan; failure to comply with HUD-FHA reporting 
requirements under the Home Mortgage Disclosure Act (HMDA); sharing 
office space and commingling employees with another firm; failure to 
comply with disclosure requirements under the Real Estate Settlement 
Procedures Act (RESPA); annual audit report not in compliance; 
originating a loan that exceeded the HUD-FHA maximum mortgage amount; 
failure to maintain complete mortgage origination files; and failure to 
utilize proper gift letters.

    Dated: April 26, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-10845 Filed 5-1-96; 8:45 am]
BILLING CODE 4210-27-P