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FHA Reaches $230,000 Settlement With First Guaranty Mortgage Corporation

Apr 19, 2011

The Federal Housing Administration’s Mortgagee Review Board (MRB) has announced a settlement agreement with a Virginia-based mortgage lender for failing to apply FHA’s underwriting standards when approving loans. Among the alleged violations, the MRB claimed that First Guaranty Mortgage Corporation (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. As part of the settlement, First Guaranty Mortgage Corporation (FGMC) agrees 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. 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. “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.” FHA’s Mortgagee Review Board sanctions FHA-approved lenders for violations of the agency’s program requirements. The Board has the authority to withdraw the FHA approval of a lender that violates FHA requirements so that the lender cannot participate in FHA programs. The Board also has authority to enter into settlement agreements with lenders and can impose civil money penalties, probation, suspension, and issue letters of reprimand. This fiscal year alone, the MRB took 20 administrative sanctions against lenders, including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.
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Apr 19, 2011
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