August 5, 2009 / 3:46 AM / 10 years ago

Taylor Bean barred from making FHA-backed mortgages

NEW YORK, Aug 4 (Reuters) - Taylor, Bean and Whitaker Mortgage Corp, which had been offering $300 million to help keep the troubled lender Colonial BancGroup Inc CNB.N afloat, was barred on Tuesday from making new loans guaranteed by the Federal Housing Administration.

In a statement, the FHA also said the Government National Mortgage Association, better known as Ginnie Mae, was ending Taylor Bean’s right to participate in its mortgage-backed securities program, and would take control of the closely-held firm’s nearly $25 billion Ginnie Mae portfolio.

The FHA also said it planned to sanction two top executives at Ocala, Florida-based Taylor Bean for providing false information to the agency.

Tuesday’s sanctions were announced a day after federal agents associated with the special inspector general for the government’s Troubled Asset Relief Program (TARP) searched a Colonial office in Orlando, Florida. The Ocala Star-Banner reported a separate search at Taylor Bean’s office in Ocala.

A Taylor Bean spokeswoman did not immediately return a call seeking comment. The company was the 12th-largest U.S. mortgage provider in 2008, the newsletter Inside Mortgage Finance said.

According to the FHA, Taylor Bean was sanctioned because it failed to submit a required annual financial report, and “misrepresented” that there were no unresolved issues with an independent auditor.

That auditor had in fact discovered “irregular transactions that raised concerns of fraud,” the FHA said.

“There is a very clear message that should be heard throughout the FHA lending world: operate within our standards or we won’t do business with you,” Shaun Donovan, the secretary of housing and urban development, said in a statement.

Colonial is a Montgomery, Alabama-based lender with about $25.5 billion of assets and 355 branches in Alabama, Florida, Georgia, Nevada and Texas.

Last week the bank said it concluded there was “substantial doubt” about its ability to continue as a going concern.

It cited a possible capital shortfall that could leave it out of compliance with “cease and desist” orders imposed by the Federal Reserve, the Federal Deposit Insurance Corp and the State of Alabama.

The $300 million Taylor Bean investment could have helped Colonial obtain $550 million in federal aid from TARP. (Reporting by Jonathan Stempel; Editing by Valerie Lee)

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