HUD's Office of Inspector General is alleging that a net branch of a California lender engaged in predatory lending by charging excessive points, fees, and interest rates on Federal Housing Administration loans.An OIG audit of the Downey branch of Guild Mortgage Co. found that loan officers charged discount points on nine loans without reducing the interest rate on the loan. "In our opinion, these were unearned fees and a violation of Section 8 of the Real Estate Settlement Procedures Act," the audit report says. GMC, based in San Diego, denied the allegations of predatory lending and pointed out that the sellers paid the closing costs and points. "FHA does not regulate or prohibit fees paid by the seller," GMC senior vice president Linda Maguire told MortgageWire. The Department of Housing and Urban Development's OIG auditors also found evidence that 16 of the 40 loans reviewed involved property flips or straw buyers. GMC realized there were problems at the Downey branch and closed it two years ago. "We are confident that once HUD has a chance to review both the OIG report as well as Guild's [39-page] response, it will agree that the findings in the [OIG] report lack support," Ms. Maguire said.

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