The Federal Housing Administration (FHA) has announced that it is immediately suspending Equitable Trust Mortgage Corp. (ETM), claiming the Baltimore-based lender improperly overcharged 37 borrowers for broker and loan origination fees in excess of what the U.S. Department of Housing and Urban Development currently allows.
The suspension will run for at least six months.
HUD discovered that these unauthorized fees were charged to a substantially greater percentage of minority borrowers (68%) than non-minorities.
HUD's Mortgagee Review Board (MRB) also found that, in 21 cases, ETM failed to properly disclose all loan origination fees, as well as lender fees to mortgage brokers (i.e., yield-spread premiums), on borrowers' Good Faith Estimates. In addition, the company's loans have a default rate that is well in excess of the national average, HUD says.
"It is critical that FHA lenders apply our standards and do not overcharge borrowers," says FHA Commissioner David Stevens. "The fact that a disproportionate number of these borrowers were minority families is also troubling. I am fully committed to protecting consumers and the fiscal health of the FHA."
FHA limits the total loan origination charges a borrower is required to pay to 1% of the mortgage amount. In this case, FHA found that ETM charged borrowers both a broker fee and an additional 1% origination fee. By charging both a broker and an origination fee totaling more than 1% of the loan amount, ETM received excessive compensation and improperly charged consumers duplicative and unreasonable fees to originate their loans.
HUD's Office of Inspector General is also investigating ETM's lending practices. ETM may appeal its immediate suspension by submitting a written request for a hearing before an administrative law judge within 30 days.
SOURCE: Federal Housing Administration