FHA Suspends Lender for Overcharging Minority Borrowers

The Federal Housing Administration (FHA) suspended Equitable Trust Mortgage Corp. on Monday effective immediately.

The action comes after Equitable Trust Mortgage allegedly overcharged 37 borrowers for broker and origination fees beyond those allowed by HUD.  The company allegedly charged an additional 1% of the mortgage amount in origination fees on top of the 1% allowed by HUD.

In addition, HUD found that 68% of the effected files were those of minority borrowers, leading them to suspect discrimination.

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“It is critical that FHA lenders apply our standards and do not overcharge borrowers,” said FHA Commissioner David Stevens.  “The fact that a disproportionate number of these borrowers were minority families is also troubling. I am fully committed to protecting consumers and the fiscal health of the FHA.”

Finally, HUD found that in 21 alleged cases, Equitable Trust Mortgage failed to disclose all origination fees as well as the yield spread premiums in the borrower’s Good Faith Estimates.

The HUD OIG is investigating Equitable Trust Mortgage’s lending practices, and they will be suspended for at least six months due to the severity of the infractions, as well as the risk to taxpayers and the FHA insurance pool. They have 30 days to appeal the suspension.

According to HUD data, Equitable Trust Mortgage had a small reverse mortgage operation, endorsing 36 HECMs in FY 2009.

Write to Reva Minkoff

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  • Just wondering…doesn't FHA need to review their whole client base for a complete year or more?…if 60-70% of their overall client base is minority, does their action constitute racial discrimination, or just consistent poor/illegal practices?

  • Good!!

    I could not agree more with the reversemaniac. This is the kind of enforcement that is needed from HUD.

    However, Peter makes a great point about there being insufficient information to evaluate if the racial practice conclusion was justified.

  • Suspension isn't enough: Heavy fines and JAIL TIME should be the penalty.
    Loan Originators didn't make these kinds of decisions–Company Officers and Owners obviously did. It's time HUD took the gloves off and give THIEVES what they have really earned. How would you feel if the Client included your Parents? Forget racial discrimination; the color of a man's skin or his origin has nothing to do with this case: This is out and out theft
    from Seniors!

  • Suspension isn’t enough: Heavy fines and JAIL TIME should be the penalty.rnLoan Originators didn’t make these kinds of decisions–Company Officers and Owners obviously did. It’s time HUD took the gloves off and give THIEVES what they have really earned. How would you feel if the Client included your Parents? Forget racial discrimination; the color of a man’s skin or his origin has nothing to do with this case: This is out and out theftrnfrom Seniors!

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