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Lend America's Servicing Will Be Up for Grabs

Melville, NY-Now that the Government National Mortgage Association has declared Lend America/Ideal Mortgage Bankers here in "default" on its servicing portfolio, investment bankers are trying to figure out the fate of its receivables.

At press time it was anticipated that, for now, GNMA would leave the servicing task to Lend America's subservicer but there was talk that eventually the government might transfer the portfolio to Bank of America.

The Department of Housing and Urban Development declined to talk about the matter as did the company's spokesman.

It's unclear how much in the way of GNMA servicing rights the company owns. Investment bankers that broker servicing rights say the size of the receivables range from $1.3 billion to as high as $1.8 billion. Almost all of it is FHA insured.

This summer Lend America was actively trying to sell a $1 billion package of GNMA servicing rights through a third-party advisory firm. The sale never came off. (FHA banned Lend America/Ideal and an affiliate "dba" from its program in early December, citing numerous underwriting violations.)

Meanwhile, as the company winds down its operations, it may have a servicing-related nightmare on its hands: Lend America was refinancing certain customers without paying off their prior existing lien, according to veteran mortgage banking attorney Robert Lotstein.

Mr. Lotstein, who has clients that did business with the nonbank, said this has created a situation where customers received a new loan from the lender but without their existing lien being paid off.

A managing attorney with Mortgage Banking Advisors PLLC, Mr. Lotstein said this has created a situation where some Lend America mortgagors "will get a call from their old lender [servicer] asking where the payment is." The attorney said his mortgage banking and vendor clients informed him of the situation.

Mr. Lotstein said he could not quantify how many Lend America refi customers might be having this problem. The company spokesman said the lender is trying to rectify the problem.

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