Are you considering an FHA home loan? If so, be sure to examine the FHA’s list of financial institutions sanctioned for violating FHA rules. The majority of FHA-approved lenders operate well within the rules, but the recent sanctions against some financial industry bad apples shows a small minority trying to outmaneuver both the consumer and the FHA. The sanctions were issued for a number of problems, all varying from case to case. Investigators found violations ranging from bad quality control all the way to falsifying documents used to issue FHA home loans.
FHA mortgages have specific rules for both the banks and borrowers alike. Consumers and lenders reap benefits from FHA-insured loans, but when FHA rules are broken or ignored, it takes the FHA time to catch up. The FHA has standard periods of review for its lenders; banks that passed an FHA review might not get caught violating FHA standards until the following review.
When violations are detected, the FHA issues sanctions; those 120 lenders were punished with fines in some cases, to loss of “FHA approved” status where appropriate.
That’s what happened in the case of the Houston, Texas-based Gatewood Mortgage Corporation. FHA reviewers discovered a variety of violations including falsified documents and violation of FHA approval guidelines. The entire case is detailed in a Department of Housing and Urban Development press release. The end result? Gatewood Mortgage Corporation lost its FHA approved lender status and is no longer authorized to work with the FHA.
In all of the 120 cases where sanctions were issued, they were the result of routine reviews. In spite of some news sources description of these cases as a “crackdown”, in every case the 120 lenders who received sanctions were punished because of the scheduled review process rather than a special task force operation.
FHA loans are safer as a result of these sanctions, and a bill called the Helping Families Save Their Homes Act further protects those interested in FHA home loans by requiring HUD approval for all parties participating in FHA single family mortgages. HUD now has the authority to issue civil penalties against loan originators who are not HUD-approved but still try to issue or participate in FHA mortgages, and there’s a new requirement for FHA-approved lenders to use company names registered with HUD for their advertising campaigns. This prevents deceptive or misleading advertising campaigns. There are also now, more aggressive requirements for reporting the status of licensed status for loan officers. Suspended, disbarred or indicted loan officers can’t take part in the FHA loan process.
More information including links to a list of all 120 FHA lenders who received sanctions is available at the Department of Housing and Urban Development official site.