Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Score News, Tips & Advice « Credit Scores > Credit Score News > New York Mortgage Lender Subpoenaed by HUD for High Default Rates

New York Mortgage Lender Subpoenaed by HUD for High Default Rates

By Sally Maison
Published: Friday, January 22nd, 2010

A New York-based mortgage lender which issues government-backed loans is among the 15 companies recently subpoenaed by the HUD for their high default rates and lax lending standards. These lenders were reported to have low credit score requirements and clients at high default risks.

New York Mortgage Lender Subpoenaed by HUD for High Default Rates Sterling National Mortgage Co., Inc., based in Great Neck, NY, is one of the 15 FHA-backed mortgage companies subpoenaed by the Housing and Urban Development (HUD) last Tuesday, Jan. 12. The subpoena is part of an ongoing federal investigation into creditors that have high default rates and slack lending standards, which threatens the ability of the Federal Housing Authority (FHA) to meet its obligations to borrowers.

Those companies are mandated by Congress to have at least 2 percent of FHA capital reserves on their portfolio, but they only have theirs at 0.53 percent. Their lax standards have propelled their market shares to jump almost ten times since 2006.

The 15 subpoenas came after FHA revoked another New York-based lender’s license early December. Lend America in Melville can no longer issue government-backed loans and was forced to shut down on Dec. 1, 2009. Aside from being fined $512,000, the company is also set to be charged with civil and criminal cases.

With FHA refusing to insure Lending America’s loans any further, the company was forced to stop its operation, leaving 600 employees out of work just before Christmas. 90 percent of the loans the company issues are backed by FHA.

Lend America has one of the lowest credit score requirements in the mortgage industry. Many poor-credit consumers who sought their services are now facing to lose the thousands of dollars they deposited with the company. They will also be unable to get the other costs they spent for the processing of their loans.

Former Lend America employees said the company had taken actions to bring down their default rates such as increasing their credit score requirements to 580 and refusing to lend to borrowers who had late mortgage payments in the past 12 to 24 months. However, those moves along with other company efforts proved to be too late.

Meanwhile, the HUD announced that those who have recently been subpoenaed are not necessarily guilty of any mismanagement. HUD clearly outlined that it is merely part of an ongoing investigation.

A spokesperson for Sterling National Mortgage reported that they were merely asked by the HUD Inspector General’s Office to investigate 20 mortgage file. Those request files originated between 2007 and 2008 and were among the 3,600 loans SNMC has closed since 2007. All those loans met the FHA standards during that time.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.