[Federal Register Volume 70, Number 87 (Friday, May 6, 2005)]
[Notices]
[Pages 24110-24112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9142]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4914-N-05]


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, 
this notice advises of the cause and description of administrative 
actions taken by HUD's Mortgagee Review Board against HUD-approved 
mortgagees.

FOR FURTHER INFORMATION CONTACT: David E. Hintz, Secretary to the 
Mortgagee Review Board, 451 Seventh Street, SW., Washington, DC 20410-
8000, telephone: (202) 708-3856, extension 3594. A Telecommunications 
Device for Hearing- and Speech-Impaired Individuals (TTY) is available 
at (800) 877-8339 (Federal Information Relay Service).

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 a description of and the cause for 
administrative action against a HUD-approved mortgagee'' by the 
Department's Mortgagee Review Board (Board). In compliance with the 
requirements of section 202(c)(5), this notice advises of 
administrative actions that have been taken by the Board from July 1, 
2004, to December 31, 2004.

1. Academy Mortgage Corporation, Salt Lake City, Utah, [Docket No. 04-
4399-MR]

    Action: Settlement Agreement signed March 18, 2005. Without 
admitting fault or liability, Academy Mortgage Corporation (Academy) 
agreed to pay HUD a civil money penalty in the amount of $288,500 and 
indemnify HUD on four loans. Academy also agreed to reimburse each 
borrower identified in Attachment B to the Settlement Agreement, fees 
identified as unallowable by HUD.

[[Page 24111]]

    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
Academy: Violated requirements governing conflict of interest by paying 
commissions to loan officers who had received payment from another 
source in the same HUD/FHA loan transaction; failed to properly verify 
the effectiveness, adequacy and/or stability of income used in 
qualifying borrowers; failed to properly verify the source and adequacy 
of funds required for closing; failed to ensure outstanding judgments 
were satisfied prior to closing the loan; failed to document that it 
reviewed the real estate appraisals for 64 HUD/FHA insured mortgage 
loans that it underwrote. Specifically, Academy did not document that 
it analyzed appraisals that showed large increases in value and recent 
sales; charged borrowers unallowable fees, such as documentation 
preparation fee, document review fee, funding fee, wire fee, 
Administrative Compliance fee, Neighborhood Gold fee, and Wire review 
fee, among others; and failed to retain entire case files for loans it 
originated.

2. Chess Financial Services, Inc., Camp Springs, MD [Docket No. 04-
4355-MR]

    Action: The Board voted to reject Chess Financial Services, Inc.'s 
(Chess) settlement offer and imposed a civil money penalty of $43,500.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
Chess: permitted its employees to process loans in which they were 
interested parties; permitted three individuals who were not employees, 
or who were not excusive employees, to originate mortgages; failed to 
maintain a quality control plan for the origination of HUD/FHA insured 
mortgages for two fiscal years, and failed to complete quality control 
reviews in accordance with HUD/FHA requirements; and failed to maintain 
complete loan origination files for review and to comply with HUD's 
requests for documentation.

3. First Service Mortgage, Inc., College Park, GA [Docket No. 04-4440-
MR]

    Action: Settlement Agreement signed December 20, 2004. Without 
admitting fault or liability, First Service Mortgage, Inc. (First 
Service) agreed to pay an administrative payment of $16,350 and 
indemnify HUD for any losses on two loans.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
First Service: failed to remit Mortgage Insurance Premium (MIP) within 
15 days; failed to ensure employees worked exclusively for First 
Service submitted false and conflicting documentation to obtain HUD/FHA 
Mortgage Insurance; failed to maintain a Quality Control Plan that 
complies with HUD/FHA requirements; and originated a second FHA-insured 
mortgage without obtaining the required information, and without 
resolving discrepancies.

4. First Union National Bank d/b/a Wachovia Bank, N.A., Raleigh, NC 
[Docket No. 04-4230-MR]

    Action: Settlement Agreement signed January 6, 2005. Without 
admitting fault or liability, Wachovia Bank, N.A. (Wachovia) agreed to 
pay an administrative payment of $8,500.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
First Union National Bank (First Union): failed to notify HUD of its 
merger with Wachovia; and First Union failed to timely perform property 
inspection on one HUD/FHA insured multifamily project.

5. International Home Mortgage Capital Corporation, Las Vegas, NV [04-
4388-MR]

    Action: On November 29, 2004, the Board issued a letter to 
International Home Mortgage Capital Corporation (International Home 
Mortgage) immediately withdrawing its HUD/FHA approval for five years. 
The Board also voted to impose a civil money penalty in the amount of 
$118,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
International Home Mortgage: Failed to implement a Quality Control Plan 
in accordance with HUD/FHA requirements; failed to verify the source 
and adequacy of borrowers' funds to close their loans; failed to verify 
and analyze borrowers' effective income; failed to analyze borrowers' 
liabilities; failed to ensure compliance with HUD/FHA credit 
requirements for borrowers; and failed to calculate the maximum 
mortgage amount.

6. Mann Financial, Inc., Helena, MT [Docket No. 04-4280-MR]

    Action: Settlement Agreement signed March 29, 2005. Without 
admitting fault or liability, Mann Financial, Inc. (Mann) agreed to pay 
HUD an administrative payment in the amount of $46,000 and indemnify 
HUD on four loans. Mann also agreed to pay HUD $3,982 as pay-down of 
principal on two loans.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
Mann: Failed to ensure HUD/FHA loans were originated by Mann employees; 
submitted false certifications to HUD regarding whether information was 
obtained directly from the borrowers by full-time employees of the 
lender; underwrote mortgages for mortgagees that were not approved loan 
correspondents for Mann; failed to implement fully its quality control 
plan in that it did not review eight defaulting mortgages; failed to 
document adequately the borrower's source of funds for the down payment 
and/or closing costs; failed to ensure that the allowable maximum 
mortgage amount was not exceeded; admitted underwriter error caused a 
mortgage amount in excess of the maximum allowed and has offered to 
pay-down the mortgage in connection with a settlement; failed to 
document accurately and/or calculate the borrower's effective income. 
Specifically, Mann failed to document that SSI income would continue 
for the first three years of a mortgage; failed to document income and 
Mann did not establish a sufficient employment history; failed to meet 
the underwriting requirements relative to a temporary interest rate buy 
down. Specifically, Mann did not demonstrate that borrowers for three 
mortgages had likelihood for increased income after the buy down period 
ended; and failed to document the contributory value of sweat equity 
labor. Mann failed to document the market value of a borrower's 
roofing, siding, framing, carpentry and painting.

7. Mirad Financial Group, Inc., San Diego, CA [Docket No. 03-3159-MR]

    Action: Settlement Agreement signed October 1, 2004. Without 
admitting fault or liability, Mirad Financial Group, Inc., (Mirad) 
agreed to pay a civil money penalty of $46,000. Mirad also agreed to 
indemnify HUD for any losses incurred on six loans.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
Mirad: Failed to ensure that loan officer who originated three loans 
was not suspended from participating in government programs; used 
independent contractors to originate 18 FHA-insured loans; underwrote 
loans for mortgagees that were not on HUD's list of approved loan 
correspondents for

[[Page 24112]]

Mirad; failed to adequately document gift funds used for downpayment 
and/or closing costs; failed to ensure that the borrower met the 3 
percent minimum downpayment requirement; failed to ensure the borrower 
did not exceed the maximum allowable mortgage; failed to obtain a 
satisfactory explanation of the borrower's late payments, charge-offs 
and collection accounts; and failed to adequately document that the 
seller owned the property.

8. Realty Mortgage Corporation, Flowood, MS [Docket No. 04-4443-MR]

    Action: Settlement Agreement signed November 12, 2004. Without 
admitting fault or liability, Realty Mortgage Corporation (Realty 
Mortgage) agreed to pay HUD an administrative payment of $81,500 and 
indemnify HUD on three loans.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
Realty Mortgage: Accepted loans that were originated by a non-HUD 
approved lender; underwrote the loans which clearly indicated that a 
third party was involved in the origination; failed to adequately 
verify the source and/or adequacy of funds used for earnest money 
deposits and/or close loan transactions; closed loans in excess of the 
maximum allowable mortgage amount resulting in over-insured mortgages; 
and failed to close loans in accordance with the terms of the sales 
contracts and/or to obtain the required real estate certifications.

9. Seattle Mortgage Company, Seattle, WA [Docket No. 05-5021-MR]

    Action: Settlement Agreement signed March 28, 2005. Without 
admitting fault or liability, Seattle Mortgage Company (Seattle 
Mortgage) agreed to pay HUD an administrative payment in the amount of 
$21,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements where Seattle Mortgage: Violated HUD/FHA 
conflict of interest provisions by paying commissions to a loan officer 
who originated HUD/FHA-insured loans and who also received 203(k) 
consultant fees in connection with those loans.

10. Tribeca Mortgage Corporation, Lake Success, NY [Docket No. 04-4367-
MR]

    Action: The Board voted to impose a civil money penalty on Tribeca 
Mortgage Corporation (Tribeca) in the amount of $30,000.
    Cause: The Board took this action based on the following violations 
of HUD/FHA requirements in origination of HUD/FHA-insured loans where 
Tribeca: Originated loans where the borrowers were charged fees in 
excess of the one percent allowable origination fee for services 
covered by the origination fee; originated loans without an approved 
relationship with the HUD-approved sponsor, and/or without being 
identified as the originating lender when the FHA Case Number was 
requested; failed to file required annual reports regarding loan 
origination activity; and failed to maintain and implement an adequate 
Quality Control Plan in compliance with HUD/FHA requirements.

    Dated: April 29, 2005.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 05-9142 Filed 5-5-05; 8:45 am]
BILLING CODE 4210-27-P