Consumer Finance Insights
August 10, 2015

HUD Announces Settlement Agreements with Two Mortgage Lenders Over Alleged Violations of FHA Rules

On August 10, 2015, HUD announced​ that it had reached settlement agreements with two regional mortgage companies over allegations that the companies failed to comply with HUD’s Fair Housing Act regulations. Both companies obtained approval from HUD to originate FHA-insured mortgage loans. According to HUD, one of the companies charged illegal fees on FHA loans and improperly funneled the fees to a separate company owned by an employee. HUD also alleged the company committed multiple violations of HUD’s underwriting standards for FHA loans. The second company originated mortgage loans in connection with the sale and construction of manufactured homes. According to HUD, this company charged fees for construction work that was never performed, and also violated various underwriting standards. Both companies allegedly artificially inflated mortgage amounts by charging these illegal fees and therefore increased the FHA’s potential exposure in the event of foreclosure.

Both companies agreed to civil monetary penalties (ranging from approximately $150,000 to $300,000) and permanent withdrawal of their authorization to originate FHA-insured loans. HUD pursued both enforcement actions through its “Mortgagee Review Board,” which has authority to revoke or suspend lenders’ FHA approval, impose monetary penalties, and enter into settlement agreements with lenders over alleged violations of FHA regulations. Both companies denied wrongdoing.