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HUD bars two more lenders from FHA program.

The Department of Housing and Urban Development announced on April 1 that it was permanently stripping the authority of two lenders to participate in the Federal Housing Administration program. Atlanta-based RSA Financial Inc. and Houston-based 1st Alliance Mortgage LLC were the focus of the new enforcement actions.

This is just the latest example of a dramatically stepped-up enforcement posture at HUD. The department at the same time announced two additional settlement agreements with Franklin First Financial LTC, Melville, New York; and Paramount Bond and Mortgage Co. Inc., St. Louis. Franklin First agreed to pay HUD a civil penalty of $413,500 and indemnify HUD for any losses stemming from 31 FHA loans. Paramount agreed to pay a penalty of $68,500 and indemnify HUD for any losses tied to seven FHA loans.

In a release describing these latest enforcement actions, HUD explained it was permanently withdrawing its approval for RSA Financial and 1st Alliance, preventing them from originating or underwriting new FHA-insured loans or participating in the single-family insurance program. HUD's Mortgagee Review Board (MRB) voted to impose a $15,000 civil penalty against RSA and collect $267,900 from 1st Alliance.

The infractions committed by RSA Financial included misleading HUD about being properly licensed by the Georgia Department of Banking and Finance at the time the company was seeking FHA lender approval. The MRB also alleges that RSA "submitted false and/or misleading information regarding the criminal conviction and sanction history of its owner and executive, Ramsey Suphi Agan."

As for 1st Alliance, HUD claims the lender engaged in prohibited branch arrangements, provided false certifications, failed to put in place a quality-control plan and a number of additional violations of HUD/FHA standards, according to HUD.

In announcing the sanctions, FHA Commissioner David Stevens stated, "If lenders want to do business with the FHA, it's critical that they provide complete and truthful information so that we can properly determine who we're dealing with." He added, "If any lender can't operate within FHA's guidelines, they can't do business with us."

In terms of the RSA Financial case, HUD found the lender's application to FHA contained false and/or materially misleading information in connection with the company's failure to obtain proper licensing in Georgia and when it came to Agan's history of criminal convictions and administrative sanctions. RSA represented that company officials "are neither currently, nor have ever been, debarred, sanctioned, fined, convicted, denied approval or refused a license by any state, federal or local government agency." But in an April 1 press release, HUD stated that Agan has been suspended and debarred by HUD on at least two occasions and has two felony convictions.

HUD said that in 1982, Agan pleaded guilty to two counts of knowingly submitting false statements for the purposes of influencing the actions of a federally insured bank. That prompted a sentence of two years in prison (suspended), two years of probation and a fine of $10,000 against Agan. Those actions led to the permanent withdrawal of his former FHA-approved company, Adana Mortgage Bankers, and a five-year debarment of Agan. He was convicted of multiple counts of bribery by a Georgia court in 1988, prompting HUD to debar him indefinitely.

In taking action against 1st Alliance, the MRB alleged the lender used independent contractors to originate 708 loans from branch offices that were not true branches of the company. The lender also falsely certified the contractors were full-time employees of 1st Alliance. Other violations included failure to adopt and maintain a quality-control plan; failure to report employee compensation on W-2 forms; charging unallowable excessive or duplicative loan processing/origination fees; and failure to ensure fees paid outside of closing were listed on HUD-1 Settlement Statements.
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Title Annotation:Briefing Book; Department of Housing and Urban Development
Comment:HUD bars two more lenders from FHA program.(Briefing Book)(Department of Housing and Urban Development)
Publication:Mortgage Banking
Geographic Code:1USA
Date:May 1, 2010
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