(Adds complaint, background)
By Al Yoon
NEW YORK Dec 1 Lend America, a home mortgage
company under fire for allegedly violating government
underwriting guidelines, on Tuesday abruptly ceased
originations and operations.
The brief announcement on Lend America's website came a day
after the Federal Housing Administration canceled its approval
for the lender to make loans under the U.S. agency's home
mortgage guarantee program.
The FHA, citing abuses that included submitting false
documents and making loans that did not meet requirements,
imposed civil penalties of $512,500 against Ideal Mortgage
Bankers, which does business as Lend America.
The agency's action came six weeks after U.S. Attorney for
the Eastern District of New York Benton Campbell sought an
injunction against Lend America and Michael Ashley, its
executive vice president and chief business strategist.
Campbell alleged the company falsely certified that borrowers
of more than $14 million met requirements for FHA guarantees.
Demand for FHA-backed loans, the business in which Lend
America was active, has grown significantly in volume since the
onset of the housing crisis.
Origination of FHA-backed loans has surged in the past two
years as the credit crunch and housing crisis shuttered many
private funding sources and left borrowers scrambling for help
in refinancing loans. To maintain volume, lenders focused their
business toward the FHA for loans that do not meet the stricter
funding requirements of Fannie Mae and Freddie Mac.
Lend America is the latest lender to face scrutiny by the
Department of Housing and Urban Development, which is
undertaking a larger enforcement effort against lenders that
abuse their rights to make FHA-backed loans. In August, the FHA
suspended Taylor Bean & Whitaker after finding the lender
misrepresented an audit that raised concerns of fraud.
Taylor Bean was the nation's 12th-largest mortgage lender
from January to June. Lend America is smaller, but was the 22nd
largest originator of FHA loans based on originations in the
two years through Sept. 30.
The FHA is also fighting to limit its risk as mortgage
losses have caused its capital reserves to plummet.
The U.S. attorney's complaint said Ashley violated
regulations laws and an industry ban throughout his career,
including falsifying documents to meet funding guidelines of
Fannie Mae and Freddie Mac. Ashley plead guilty in 1993 to
conspiracy to commit wire fraud in connection with instances of
mortgage fraud, according to the complaint.
Spokesmen for the U.S. attorney, the FHA and Lend America
declined to comment.
Lend America employs about 600 people in Melville, New
York, about 50 miles from New York City. It occupies the former
home of American Home Mortgage, a lender whose rapid decline in
2007 ended in bankruptcy.
Callers to Lend America offices heard a recorded message
telling customers it was stopping operations and that it would
honor obligations to past and current borrowers.
Several borrowers, from Ohio to California, who claimed
they recently refinanced with Lend America, said the company
failed to pay off their existing mortgages after they received
a new loan.
(Editing by Dan Grebler)
((firstname.lastname@example.org; +1 646-223-6347; Reuters