(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 loan operations.
“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 partners.”
“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 prepared response.
Lend America is the nation’s 22nd largest FHA loan originator, based on new originations in the two years through Sept. 30.
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 oversight.
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 standards. (Reporting by Corbett B. Daly, Editing by Leslie Adler)