Suspended Lender Reaches Settlement with FHA

Suspended Baltimore-based lender Equitable Trust Mortgage (ETM) reached a settlement agreement with The Federal Housing Administration (FHA) on Friday, ending their suspension.

ETM had been suspended last week for allegedly overcharging 37 borrowers on their origination fees.  In addition, 68% of the affected borrowers were minorities, a fact that FHA commissioner David Stevens called “troubling.”  By settling without admitting fault or liability, ETM has paid HUD a civil money penalty in the amount of $277,500.

The company also agreed to refund the overcharged amounts to the 37 borrowers, ranging from $500 to $9,135.  The total amount refunded will be $147,589.81. If ETM is unable to reach the borrower, the funds will be donated to a HUD approved housing counseling agency.

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In an emailed statement on Friday, FHA commissioner Stevens called the settlement “a victory for both HUD and the borrowers who were affected by ETM’s actions.” He added that, “The settlement agreement imposes a significant penalty on ETM for violating HUD requirements, but also provides the wronged borrowers relief in these tough economic times.”

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

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  • It is good to see that HUD did not end their FHA lending operations; however, that does not mean the result was good.

    First the fines should have been more severe; triple damages would have been more appropriate and is hardly unrealistic or unprecedented. Some token heads should have rolled and based on their individual responsibilities removed from the company and prohibited from doing FHA loans for varying periods of time.

    After the Pinto car crash fiasco, Ford failed to remove their core problem, key decision makers. Years later when another fiasco arose with the Explorer it was apparent that faces had changed but the same culture that allowed risk to rule saftey issues was still fostered because the root of the problem had been left in place.

    The final thing HUD should have done is requiring closer scrutiny through more through, more frequent audits of their transactions, and significantly improved internal controls with direct reporting responsibilities both with senior management and the Board of Directors with meaningful acknowledgements0. If management failed to provide the necessary internal controls the first time, it is doubtful they will now provide little more than the controls needed to get HUD off of their backs unless HUD puts teeth into its oversight of future operations.

    • iluvrms,

      I do not think you understand the situation. This firm did a lot of FHA forwards loans. I doubt if the HECMs were the loans where there overcharges on origination fees.

  • They were THIEVES, Critic: What's “Good” about the settlement? You Die-Hard free market boys (girls?) never seem to amaze me. We're talking Seniors here; ANYONE in the reverse mortgage industry should be ashamed HUD let these BASTARDS continue to sell FHA HECMS (Read that STEAL from Seniors.).

    • James,

      Your claim is interesting. My family and inlaws who resent Glen Beck and his ilk (except my mother-in-law and father who are fascinated with O'Reilly — both are Irish), think of me as a pro (Bill) Clinton/(Nelson) Rockefeller/(John) Lindsay/(Pat, Edmond G.) Brown/(Samuel T.) Rayburn regulation enthusiast. I guess no one can be as pro regulation as you, which brings up that State of Washington mortgage regime you and I both opposed.

      You are so ready to believe that seniors were hurt in the article above. Can you point out one HECM borrower who was injured? How about one senior?

      Most of the FHA loans these guys did were forward mortgages. You are so ready to pound the table that the ones you support (Sun West for example) are always the good guys and the ones you don't know are always “STEALING” from seniors. What is with the absolute loyalty that leaves your arguments so lacking rationality? Stop drinking so much Expresso up there in the Great Northwest!!!

      James, you fought for this country so that no one could be found guilty without a fair trail. But, then when it comes to those you disagree with, there is no need for a trial, just the gallows.

  • How can you overcharge on a Reverse Mortgage not know the rules or the reverse mortgage.. or have a closing agent not know them..in this market you need all your relationships knowing the “Rules” I had one of my account go through an HUD audit and they called and thank me for keep them clean.
    The other closing agent they used sent them Final HUD with wrong info and it was the area where they failed the audit, it also required they return $$ that they where told was consider overcharging by having wrong name on the wrong line..They had correct fees per lender but the wrong name on Final HUD made it look like they collected more than allowed. Guess who just increased their business the closing agent who knows the rules…

  • How do you overcharge on a Reverse Mortgage… easy have your settlement agent do it for you.. by not following the HUD guidelines and doing your HUD incorrectly.. I had a client that had gone through a HUD audit and call me up to thank me for keeping them clean..seem HUD had different take on the proper name for some of the item charged.. now my client did nothing wrong but the “other settlement agent” clause them to have to return some funds due to wrong name on HUD they where happy to report my branches that use me passed with flying colors.. go figure who just go more business.. so keeping up to date on the HUD rules and know you are working with senior and we need to protect them and our industry from the one who got us into this mess in the first place.. I like the HUD will allow them to donate the $$ they can't find the borrower
    (They are FHA loan so owner occupied required)

    • Theresa,

      I am not sure which one of your comments to respond to.

      As noted previously, these guys did a lot of forward FHA loans. Admin was commenting on how many total HECMs show up as endorsed for this company. I doubt if many of the errors were HECM based.

  • To assume is a terrible trait, Critic, I agree: I assumed since this was a story on RMD, this was a story about FHA HECMs. Perhaps you are right–it wasn.t. In any case, it's still theft; why should we as a society through our government tolerate such action? By the way, I was raised a Rossevelt Democrat by a Mother whose Family starved out of the Ozarks in 1932; by a Father who was a “HighClimber” for various Logging Companies during the Great Depresson when it was not unusual to kill a man a day in the woods because of “HIGHBALL” and unsafe working conditions. Today I am what I was in College (a very brief period): A GDI. Because there is too much Veteran in me, I did vote for Senator John McCain and (and crazy as it sounds) rooted for President Obama. As I've told you before, I'm tired of being the Policeman of the World; it's time to come home and take care of our own people. By the way, this is my last blog (for a while; can't keep an old, old dog down long). Mom and I are receiving an unexpected Christmas Gift this year early: Our Chinook Pilot Son is returning from Iraq on the 21st. To those of you who are inclined: Merry Chrismas.

    • James,

      Happy Holidays!! I am happy that your son is coming home. Thank him for all of us for his service to our country. Enjoy this time.

      Also please see my reply to iluvrms. It applies to you as well.

  • James,rnrnYour claim is interesting. My family and inlaws who resent Glen Beck and his ilk (except my mother-in-law and father who are fascinated with O’Reilly — both are Irish), think of me as a pro (Bill) Clinton/(Nelson) Rockefeller/(John) Lindsay/(Pat, Edmond G.) Brown/(Samuel T.) Rayburn regulation enthusiast. I guess no one can be as pro regulation as you, which brings up that State of Washington mortgage regime you and I both opposed.rnrnYou are so ready to believe that seniors were hurt in the article above. Can you point out one HECM borrower who was injured? How about one senior? rnrnMost of the FHA loans these guys did were forward mortgages. You are so ready to pound the table that the ones you support (Sun West for example) are always the good guys and the ones you don’t know are always “STEALING” from seniors. What is with the absolute loyalty that leaves your arguments so lacking rationality? Stop drinking so much Expresso up there in the Great Northwest!!!rnrnJames, you fought for this country so that no one could be found guilty without a fair trail. But, then when it comes to those you disagree with, there is no need for a trial, just the gallows.rnrnrn

  • iluvrms,rnrnI do not think you understand the situation. This firm did a lot of FHA forwards loans. I doubt if the HECMs were the loans where there overcharges on origination fees.

  • Theresa, rnrnI am not sure which one of your comments to respond to.rnrnAs noted previously, these guys did a lot of forward FHA loans. Admin was commenting on how many total HECMs show up as endorsed for this company. I doubt if many of the errors were HECM based.

  • To assume is a terrible trait, Critic, I agree: I assumed since this was a story on RMD, this was a story about FHA HECMs. Perhaps you are right–it wasn.t. In any case, it’s still theft; why should we as a society through our government tolerate such action? By the way, I was raised a Rossevelt Democrat by a Mother whose Family starved out of the Ozarks in 1932; by a Father who was a “HighClimber” for various Logging Companies during the Great Depresson when it was not unusual to kill a man a day in the woods because of “HIGHBALL” and unsafe working conditions. Today I am what I was in College (a very brief period): A GDI. Because there is too much Veteran in me, I did vote for Senator John McCain and (and crazy as it sounds) rooted for President Obama. As I’ve told you before, I’m tired of being the Policeman of the World; it’s time to come home and take care of our own people. By the way, this is my last blog (for a while; can’t keep an old, old dog down long). Mom and I are receiving an unexpected Christmas Gift this year early: Our Chinook Pilot Son is returning from Iraq on the 21st. To those of you who are inclined: Merry Chrismas.

  • Critic,

    You are correct in that I assumed because this company was mentioned in RMD that these were HECM's and seniors had been affected. While I apologize for my assumption, I have to wonder if a company that would overcharge ANY of their customers would make an exception because the client is a senior doing a HECM loan. I doubt that they would differentiate between the two. It's companies like ETM that are causing the Reverse program to look so bad and if after investigation have been found to be at fault, should be banned from the HECM program. A fine does not in any way replenish the trust and damage to the program as a whole for the rest of us.

    • iluvrms,

      I agree with your latest comment except for the portion related to punishment.

      I am for termination of participation in the HECM program if it can be shown that the errors were attributable to the intentional actions or lack of actions of management or if it is the second offense of any significant amount or numbers at all. I am also for criminal prosecution of management if it was their intent to inappropriately take funds from any borrower. Rank and file should be held to the same standard to the extent they were involved in this fiasco.

      My first comment was on the civil penalties agreed to by HUD. I thought they were much too light.

      If the “thefts” were not known to management, I believe they are deserving of a second chance. But they should be held to the highest standards with heightened HUD and FHA oversight and more frequent audits. It was my assumption by the lightness of the penalties that HUD had determined that the “thefts” were not the intent of management and that no intentional criminal wrong doing could be determined. You know what they say about assuming anything: “It makes a donkey out of you and a donkey out of me.”

      By the way, I don’t really care if the mortgagors were seniors or teenagers, theft is theft. I just find it interesting that so many respond about their specific concerns about seniors and not the general public.

  • Critic,rnrnYou are correct in that I assumed because this company was mentioned in RMD that these were HECM’s and seniors had been affected. While I apologize for my assumption, I have to wonder if a company that would overcharge ANY of their customers would make an exception because the client is a senior doing a HECM loan. I doubt that they would differentiate between the two. It’s companies like ETM that are causing the Reverse program to look so bad and if after investigation have been found to be at fault, should be banned from the HECM program. A fine does not in any way replenish the trust and damage to the program as a whole for the rest of us. rn

  • James,rnrnHappy Holidays!! I am happy that your son is coming home. Thank him for all of us for his service to our country. Enjoy this time.rnrnAlso please see my reply to iluvrms. It applies to you as well. rn

  • iluvrms,rnrnI agree with your latest comment except for the portion related to punishment.rnrnI am for termination of participation in the HECM program if it can be shown that the errors were attributable to the intentional actions or lack of actions of management or if it is the second offense of any significant amount or numbers at all. I am also for criminal prosecution of management if it was their intent to inappropriately take funds from any borrower. Rank and file should be held to the same standard to the extent they were involved in this fiasco.rnrnMy first comment was on the civil penalties agreed to by HUD. I thought they were much too light.rnrnIf the u201ctheftsu201d were not known to management, I believe they are deserving of a second chance. But they should be held to the highest standards with heightened HUD and FHA oversight and more frequent audits. It was my assumption by the lightness of the penalties that HUD had determined that the u201ctheftsu201d were not the intent of management and that no intentional criminal wrong doing could be determined. You know what they say about assuming anything: u201cIt makes a donkey out of you and a donkey out of me.u201drnrnBy the way, I donu2019t really care if the mortgagors were seniors or teenagers, theft is theft. I just find it interesting that so many respond about their specific concerns about seniors and not the general public. rn

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