The Department of Housing and Urban Development late Wednesday said it suspended former LendAmerica president Michael Primeau from conducting any business with the agency after his admission that he engaged in a "wide-scale mortgage fraud scheme."
Sources have told National Mortgage News that a criminal probe of the now defunct Melville, N.Y.-based lender is continuing.
The company was controlled by Long Island mortgage banker Michael Ashley.
HUD said Primeau pled guilty to charges that he directed employees of Lend America, a former FHA lender, to divert mortgage funds intended to pay off borrowers' first mortgages in order to pay company operating expenses.
The mortgages in question were being refinanced by LendAmerica. Sources say the company was writing new loans without paying off the existing liens.
The firm closed for good in late 2009, laying off 600 full-timers.
Two years ago HUD found that Ideal Mortgage Bankers – a 'dba' for LendAmerica -- repeatedly violated FHA origination and underwriting requirements, including submitting false certifications and failing to document borrower income and creditworthiness.
"We take this action to protect the public," said HUD's general counsel Helen Kanovsky. "Beyond this particular suspension, the broader message to the lending community should be crystal clear – the federal government will not do business with those who fleece homeowners."
