(Adds company reaction, background)
WASHINGTON, Oct 20 (Reuters) -- The U.S. government on
Tuesday accused a New York-based mortgage lender, Lend America,
of committing fraud and asked a federal judge to shut down its
government-backed loan operations.
The Justice Department said its complaint alleges that Lend
America falsely certified to the Department of Housing and
Urban Development that borrowers who received over $14 million
in loans met HUD's lending requirements when the defendants
knew they did not.
The Federal Housing Administration, a division of HUD, said
it is seeking to shut down Lend America's government-backed
"Any FHA-approved lender that seeks to do business with us
must follow our standards, it's just that simple," said FHA
Commissioner David Stevens. "If we determine that our partners
are not playing by the rules, they'll cease being our
"The company was taken by surprise, expects to continue in
business and will respond more completely once all allegations
are reviewed," Lend America spokesman John Lovallo he said in a
Lend America is the nation's 22nd largest FHA loan
originator, based on new originations in the two years through
HUD said it notified Lend America that it found 12
violations of FHA standards, including approving loans that did
not meet minimum credit requirements and failing to adequately
document the source of funds used to close the loan.
The government also said the company omitted liabilities
from the underwriting analysis and approved loans with ratios
that exceeded HUD standards.
The FHA is under increasing pressure to step up its lending
An internal audit of the government's mortgage insurance
agency completed last month found that FHA did not adequately
make sure the loans it backs have met its own lending
(Reporting by Corbett B. Daly, Editing by Leslie Adler)