HUD Slams Two Mortgage Companies for Improper Borrower Fees

The Department of Housing and Urban Development has halted Federal Housing Administration (FHA) approval of two lenders as of this week for their charge of improper fees to mortgage consumers.

HUD announced settlement agreements with the two lenders, both based in Texas, based on allegations they conducted a scheme in which they charged bogus fees to consumers and inflated mortgages for borrowers buying new construction manufactured housing.

In addition to losing its FHA approval status, American Home Free Mortgage has agreed to civil money penalties of $169,419, though the company did not admit fault or liability with respect to the charges.

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Earlier this year, HUD’s Mortgagee Review Board addressed a similar case against R.H. Lending, Inc. including underwriting violations on manufactured home loans. R.H. Lending later agreed to penalties of $300,000 for its alleged part in disguising fees to borrowers as construction fees, when in fact no work was performed.

In both cases, borrowers were charged illegitimately and FHA faced unnecessary risk.

“FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund, but to make certain families can sustain their mortgages,” said Helen Kanovsky, HUD’s General Counsel. “Lenders who engage in business practices that do not conform to generally accepted standards or who act irresponsibly will not be tolerated.”

Written by Elizabeth Ecker

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