Compliance & Regulation

The U.S. Attorney and the Department of Housing and Urban Development are seeking a court injunction to ban Lend America, Melville, N.Y., from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in product. A spokesman for the company - which also does business as Ideal Mortgage Bankers Ltd. - issued a statement saying it was taken by surprise by the complaint and expects to continue doing business. It added that it plans to "respond more completely once all allegations are reviewed." In a joint statement from the U.S. Attorney for the Eastern District of New York, and the HUD Inspector General's office, the government says Lend America/Ideal "falsely certified" that borrowers met FHA underwriting requirements. Using the civil courts, the government is seeking injunctive relief from both the company and its chief business strategist Michael Ashley. According to figures compiled by National Mortgage News, Lend America ranks 18th nationwide in terms of GNMA MBS issuance. It services about $850 million in GNMA-backed products. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production.

The U.S. Attorney and Department of Housing and Urban Development are seeking a court injunction to ban Lend America, Melville, N.Y., from originating FHA loans, accusing the nonbank lender with fraud in regard to $14 million in product. The company issued a statement saying it was taken by surprise by the complaint and expects to continue doing business. It added that it plans to "respond more completely once all allegations are reviewed." In a joint statement from the U.S. Attorney for the Eastern District of New York, and the HUD Inspector General's office, the government says Lend America/Ideal "falsely certified" that borrowers met FHA underwriting requirements. Using the civil courts, the government is seeking injunctive relief from both the company and its chief business strategist Michael Ashley. According to figures compiled by National Mortgage News, Lend America ranks 18th nationwide in terms of GNMA MBS issuance. It services about $850 million in GNMA-backed products. Lend America recently stepped up plans for expansion into correspondent mortgage banking and wholesale that included FHA production.

U.S. District Judge J. Frederick Motz sentenced Kara McIntosh of Bethesda, Md., to three years in prison followed by three years of supervised release for mail fraud in connection with a $19 million mortgage fraud scheme involving properties in the District of Columbia. Judge Motz also ordered McIntosh to pay $3.4 million in restitution. According to Rod J. Rosenstein, U.S. attorney for the District of Maryland, McIntosh admitted in her plea agreement that she and others recruited straw buyers to purchase houses. McIntosh knew the straw purchasers were not planning to live in the properties and could not qualify for mortgages. McIntosh then prepared fraudulent mortgage applications that misrepresented the buyers' income and assets. The scheme involved fraudulent loans worth more than $19 million, investigators said. Many of the purchased properties have been foreclosed upon. Two co-conspirators, Sabrina Weinberg and Osman Sharrieff Al-Bari, have been sentenced to two years and 78 months in prison, respectively. Three other co-conspirators, Timothy Reed, Jamilah Al-Bari and Terrence White, have all pleaded guilty to mail fraud in connection with their participation in this scheme and are scheduled to be sentenced in the next two months.

The Obama administration late Monday unveiled a long-awaited temporary bond purchase and liquidity program designed to help state and local housing finance agencies provide billions of dollars in low-cost mortgage money to consumers. Even though officials from the Treasury Department and other agencies — including the Federal Housing Finance Agency — refused to quantify the effort, it's believed to be in the range of $30 billion. The plan is aimed at boosting the struggling market for mortgage revenue bonds, which is currently operating at about 25% of capacity. Year-to-date, state and local housing finance agencies have issued just $4 billion in mortgage revenue bonds, the proceeds of which are used to provide low-cost residential loans and build or renovate rental housing. As part of the plan to increase liquidity, Treasury will purchase Fannie Mae and Freddie Mac securities, which will be backed by new MRBs. The GSEs also will provide partial credit enhancements, which will serve as a guarantee of sort on the bonds. Some HFAs have completely shut down their lending programs because of a lack of liquidity caused by the housing crisis. Officials stressed that the programs will be paid for by state and local HFAs, through fees, and not taxpayers. Asked who would be on the hook for losses, Treasury assistant secretary Michael Barr said, "The HFAs are in the first loss position," followed by the Treasury and then Fannie Mae or Freddie Mac.

Under a new plan unveiled Monday afternoon the Treasury Department — as well as Fannie Mae and Freddie Mac — will attempt to boost the struggling mortgage revenue bond market, which is currently operating at about 25% of capacity. Year-to-date, state and local housing finance agencies have issued just $4 billion in mortgage revenue bonds (MRBs), the proceeds of which are used to provide low-cost residential loans and build or renovate rental housing. As part of the plan to increase liquidity, the Treasury will purchase Fannie Mae and Freddie Mac securities which will be backed by new MRBs. The GSEs also will provide partial credit enhancements which will serve as a guarantee of sort on the bonds. Government officials declined to give an estimate on how much authority might be used under the program but did say there would be a ceiling to it. Some HFAs have completely shut down their lending programs because of a lack of liquidity caused by the housing crisis.

Six individuals in the New York City area — Manre Ebhomielen, Tyshe Bankston, Merrick Henry, Val Taylor, Jocelyn Joseph and Bernard Lawson — have been charged with defrauding Rochester, N.Y.-based mortgage company Flaherty Funding. According to Kathleen M. Mehltretter, U.S. attorney for the Western District of New York, in an effort to expand its business into the New York City area, Flaherty Funding contacted Queens, N.Y.-based mortgage company Vista Mortgage. Flaherty and Vista agreed that Vista would close its operation and some of its staff would become Flaherty employees, one of them being Ebhomielen who, along with the other defendants, allegedly participated in a scheme to obtain large mortgage loans from Flaherty by submitting false information and documents to the company during the loan approval process. The scheme involved five properties purchased in the New York City area. Ebhomielen, Henry and Taylor have been arrested. They will have their initial appearances in the New York City area and are then expected to appear in Rochester at a later date. The defendants could not be reached for comment.

The Department of Veterans Affairs guaranteed $68.2 billion of single-family loans for the fiscal year ending Sept. 30, an 80% spike from last year. Refinancings drove most of the increase with VA guaranteeing 144,800 transactions. A year ago it backed just 37,300 refis. Purchase mortgage transactions rose 27% to 180,900 loans in FY 2009. Despite these impressive volumes, VA officials seem most pleased with the performance of the new loans. "VA is performing extremely very well," said Mark Bologna, the director of the VA home loan guarantee program. "We outperform every other product on the market including prime loans," he told National Mortgage News Online. The VA's seriously delinquent rate is 4.69%, compared to 5.44% for prime loans, according to the latest delinquency figures compiled by the Mortgage Bankers Association. VA officials contend that one of the reasons for the performance is that the agency did not bend to industry pressure during the housing boom to allow loan officers and mortgage brokers to select their own appraisers. VA approves, monitors and selects appraisers for property evaluations. This has resulted in "good solid values," he said. "It has proven to be a good decision."

Ginnie Mae issuers securitized a record $418.1 billion in residential mortgages in fiscal year 2009 as lenders flocked to loan programs tied to the Federal Housing Administration and Veterans Administration. Overall, GNMA issuance rose by 55% compared to the prior fiscal year. (By comparison, Fannie Mae issued $612 billion in MBS through the first eight months of the year.) The Government National Mortgage Association ended fiscal 2009 (Sept. 30) guaranteeing $39.7 billion in mortgage-backed securities during the month. In August its volume was a bit higher at $44.2 billion. In the last two quarters alone the agency backed $247.7 billion in mortgage securities. Fannie and Freddie Mac securitize conventional mortgages. Ginnie Mae MBS are backed by FHA, VA and Rural Housing Service loans. FHA, which is in danger of falling below its minimum capital requirement, accounts for by far the largest portion of GNMA collateral.

After pleading guilty in July to wire fraud charges stemming from a $1.7 million scheme to defraud mortgage lenders, homeowners and others, Jason Bloom of Mount Laurel, N.J., was sentenced to 90 months in prison. U.S. District Court Judge Curtis J. Joyner also ordered Bloom to pay $1.7 million in restitution. Michael L. Levy, U.S. attorney for the Eastern District of Pennsylvania, said Bloom, acting as a settlement and title insurance agent, kept money that was slated to pay off existing mortgages. Some of the funds were intended for the city of Philadelphia. Prosecutors also said Bloom sent checks to financial institutions knowing that they were written on insufficient funds.

As part of "Operation Bad Deeds," a joint federal, state and local law enforcement operation targeting mortgage fraud crimes, 41 individuals have been charged in eight separate mortgage fraud cases with allegedly engaging in various mortgage fraud scams that collectively defrauded lenders out of more than $64 million in mortgage loans on more than 100 properties across New York State. Among those charged are six lawyers, seven loan officers, three mortgage brokers, an accountant and a residential property appraiser. According to Preet Bharara, U.S. attorney for the Southern District of New York, 31 defendants were arrested or surrendered to authorities today in New York, Pennsylvania, Ohio and North Carolina. One defendant is expected to surrender to authorities soon. Four of the defendants were previously charged and will appear in Manhattan Federal Court at a later date. Five defendants remain at large. The mortgage fraud scams alleged included property flips, equity stripping and appraisal and loan fraud. In one case, defendants operated a foreclosure rescue scheme, targeting individuals who were on the verge of losing their homes by tricking them into giving up the equity in the properties with false promises that their homes would be saved. The defendants could not be reached for comment.