First American Mortgage Trust has agreed to a settlement today with the Federal Housing Administration’s Mortgagee Review Board for allegedly violating the agency’s program requirements.
The MRB claimed that the Brookline, Mass.-based mortgage lender failed to confirm whether borrowers could sustain their mortgage payments before it refinanced their loans. The lender allegedly refinanced loans for borrowers who had serious credit delinquencies without analyzing the households’ ability to manage its credit.
As agreed upon in the settlement, FAMT will pay the FHA $72,500, compensate the government program for past insurance claims, and indemnify FHA’s insurance fund for any claims to be paid on five mortgages should they default within the next 60 days.
“FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund, but to make certain families sustain their mortgages,” said Bob Ryan, acting commissioner for the FHA. “Due diligence is at the root of mortgage lending protecting lenders, the FHA, and certainly homeowners from the prospect of foreclosure.”
