First Guaranty Mortgage Corporation (FGMC) agreed to a settlement with the Federal Housing Administration’s Mortgagee Review Board (MRB) for failing to apply the agency’s underwriting standards on Tuesday.
As part of the Settlement, FGMC agreed to pay a $127,500 civil monetary penalty and to reimburse more than $102,000 to FHA for past insurance claims and broker fees paid by borrowers who have since defaulted and been foreclosed upon. The MRB claims FGMC ignored blemished credit and payment histories, approved loans with debt-to-income (DTI) ratios that exceeded benchmarks set forth by the U.S. Department of Housing & Urban Development (HUD), and permitted borrowers to be charged improper mortgage broker fees.
In addition, FGMC will refund nearly $7,900 in improper mortgage broker fees to four families. Finally, FGMC agrees to reimburse HUD for any losses that may be incurred if any one of 18 additional loans goes into default within five years of settlement.
“FHA must ensure that lenders meet the strictest standards when underwriting loans, and not charge borrowers unnecessary or excessive fees,” said Acting FHA Commissioner Robert Ryan in a statement. “It’s critical that all lenders do the hard work at the front end of any mortgage to ensure homeownership can be sustained over the long haul.”
During fiscal year 2011, the MRB took 20 administrative sanctions against lenders, including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.