Two Texas mortgage lenders have agreed to have their Federal Housing Administration (FHA) approvals withdrawn after they were fined by the U.S. Department of Housing and Urban Development (HUD) following separate investigations that revealed the lenders had engaged in schemes to charge bogus fees to consumers.
In a statement, HUD officials say the extra fees had the effect of inflating mortgages for borrowers purchasing newly constructed manufactured housing.
Specifically, American Home Free Mortgage (AHFM) of Prosper, Texas, will pay $169,419 and has agreed to have its FHA approval withdrawn. AHFM has not admitted fault or liability with respect to HUD's allegations.
HUD's mortgagee review board claims that AHFM artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager. In addition, HUD alleges that there were multiple quality control and annual certification violations.
In June 2014, HUD fined R.H. Lending Inc. (RHL), of Colleyville, Texas, $300,000 for similar violations. RHL has also agreed to the permanent withdrawal of its FHA approval.
Specifically, HUD alleged that RHL had taken part in a scheme to disguise fees charged to borrowers as legitimate construction fees but for which no work was performed, thus creating an inflated mortgage for the borrowers and increasing the FHA's exposure to loss.Â
RHL also did not admit fault or liability.
In addition, HUD debarred two of the principal actors in the RHL scheme from doing business with the federal government for a period of seven years.
The actions finalize the settlements between HUD and the two lenders.
‘FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund, but to make certain families can sustain their mortgages,’ says Helen Kanovsky, general counsel for HUD, in the statement. ‘Lenders who engage in business practices that do not conform to generally accepted standards or who act irresponsibly will not be tolerated.’