On January 25, 2010, the Federal Housing Administration’s Mortgagee Review Board (MRB) announced that it is immediately and permanently withdrawing the FHA approval of three mortgage lenders and is suspending a fourth.

The MRB withdrew the FHA approval of Strategic Mortgage Corporation (Strategic), ProMortgage Inc., and Americare Investment Group Inc. (doing business as Premier Capital Lending. Additionally, the MRB has suspended the FHA approval of Home Mortgage, Inc. (HMI) of Burr Ridge, Illinois.

“FHA takes its oversight role very seriously and will move swiftly and decisively to protect borrowers from unscrupulous lenders,” said FHA Commissioner David Stevens. “Any lender who refuses to comply with FHA requirements will simply no longer enjoy the privilege of participating in FHA programs.”

Today’s withdrawal actions will permanently prevent Strategic, ProMortgage and Americare from participating in FHA programs while the suspension of HMI will apply for a minimum of six months or until a federal court rules in a related matter (see below). The MRB took these actions based upon the following serious violations of FHA requirements:

• Strategic (based in Oklahoma City, OK) failed to comply with employment requirements, charged borrowers impermissible or excessive fees, failed to disclose all fees on the Good Faith Estimates, and submitted a false certification to HUD in connection with an application for FHA insurance. The MRB also voted to seek civil a monetary penalty from Strategic in the amount of $71,000.
   
• ProMortgage (based in Claremore, OK) failed to adopt and maintain a Quality Control Plan, failed to perform Quality Control reviews of loans that went into default within six months after closing, engaged in a prohibited branch arrangement, made false certifications on the HUD/VA Addendum to the Uniform Residential Loan Application (URLA), failed to comply with home office operation requirements, and failed to report employee compensation on the appropriate form. In addition, the Company allowed borrowers to provide verification of employment directly to the lender which creates an opportunity for manipulation or falsification of documents submitted. Verification of employment must be submitted directly to the lender by the employer. The MRB also voted to seek a monetary penalty from ProMortgage in the amount of $124,000. 
   
• Americare (based in Arlington, TX) breached the terms of a settlement with HUD by failing to make any of the required monthly payments. On October 8, 2009, the Board entered into a settlement with Americare requiring the Company to pay of a monetary penalty of $124,000 and placing it on probation for a period of six months. Since then, Americare failed to make a single monthly payment as required under the terms of the earlier agreement.
   
• HMI (based in Burr Ridge, IL) retained its part owner and Chief Executive Officer despite his indictment and subsequent guilty plea for bank fraud. In June 2009, HMI’s part owner and CEO was indicted in the U.S. District Court for the Northern District of Illinois, Eastern Division for his role in a scheme to obtain money for 450 fictitious residential mortgage loans; a guilty plea was entered in this matter on January 15, 2010. HMI failed to notify HUD of this indictment as required. Additionally, HMI failed to comply with FHA’s annual recertification requirements.

In addition to these sanctions, the Mortgagee Review Board also took action against the following lenders:

• Action Mortgage Corporation of Cranston, Rhode Island was placed on probation for a period of six months due to its misleading advertising practices. The Mortgagee Review Board also voted to impose a monetary penalty in the amount of $7,000.
   
• Cooper and Shein, LLC (doing business as Great Oak Lending Partners) of Timonium, Maryland was placed on probation for a period of six months due to its misleading advertising practices. The Mortgagee Review Board also voted to impose a monetary penalty in the amount of $11,000.

While these lenders may appeal the Board sanctions by submitting a written request for a hearing before an Administrative Law Judge within 30 days, the filing of an appeal does not delay these actions. Complaints seeking these civil money penalties will be served upon Strategic, ProMortgage, Action Mortgage, and Cooper and Shein, in due course and the lenders will have the opportunity to contest the imposition of the penalties before an Administrative Law Judge.