National City settles US HUD case for $4.6 million

WASHINGTON, May 22 (Reuters) - National City Corp's (NCC.N: Quote, Profile, Research, Stock Buzz) mortgage unit agreed to pay $4.6 million to settle allegations it violated some requirements set by the Housing and Urban Development Department (HUD), the U.S. Justice Department said on Thursday.

National City Mortgage has so-called direct endorsement authority, a mechanism protecting the company against loss when it underwrites loans to low- or moderate-income borrowers and then submits them to HUD for insurance coverage, the Justice Department said in a statement.

The HUD program requires a lender to forward certain certifications when it submits loans for HUD insurance more than 60 days after the loan closing. Among them is the lender's certification that a loan payment is not more than 30 days past due, the department said.

The government accused National City of improperly submitting 58 late endorsement loans for insurance coverage.

"Lenders must follow HUD's rules and be held accountable if they knowingly submit loans that are not eligible for insurance," Gregory Katsas, an acting assistant attorney general, said in a statement.

A National City spokeswoman said the company denied liability, and the settlement would have no impact on its role as an FHA lender.

"We have a long history as a responsible lender," she said.

(Reporting by Julie Vorman, editing by Leslie Gevirtz)