The mortgage subsidiary of KB Home, one of the nation's largest homebuilders, has agreed to pay $3.2 million to settle allegations it engaged in poor underwriting practices in originating Federal Housing Administration single-family loans.The Department of Housing and Urban Development said it is the largest settlement ever collected from a FHA lender. "This settlement sends a strong message that FHA will not tolerate violations of its requirements, especially when they can cause homeowners to default on their mortgages," FHA commissioner Brian Montgomery said. HUD cited KB Home Mortgage, based in Los Angeles, for 13 violations, including approval of loans for unqualified borrowers with overstated or incorrect income. "We are pleased to have reached a resolution on these procedural issues with HUD -- all of which have been thoroughly addressed internally by the mortgage company," said KB Home spokeswoman Kate Mulhearn. KB Home recently announced it has entered into a joint venture with Countrywide Finance Corp. and Countrywide will take over and run KBHM's mortgage operations starting Sept. 1.

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