HUD SANCTIONS INDIANA LENDER

WASHINGTON - U.S. Housing and Urban Development Secretary Andrew Cuomo announced today that HUD has sanctioned Indianapolis lender Whitehall Funding, Inc., for violating federal lending laws.

Acting on information supplied by a housing project owner, HUD determined that WHF officials had illegally removed $589,000 in escrow funds from a lender-financed HUD project. Neither HUD nor the owner requested or authorized release of the funds.

After completing its investigation, HUD withdrew WHF's authority to be a Federal Housing Administration-approved lender for five years, and imposed a fine of $5,500, the maximum civil money penalty permitted.

According to HUD regulations, escrow funds may only be used for capital repairs of HUD-insured projects and other limited uses. Depleting escrow accounts puts tenants and HUD at risk because, in the event of a default, funds are not available for any needed repairs. It also puts HUD at risk because escrow funds are not available to offset any indebtedness.

The sanctions were ordered by HUD's Mortgagee Review Board, which monitors lenders for compliance with federal lending law, and takes actions against lenders found to be violating such laws.

In the past two years, the MRB has taken action against 99 lenders, saving taxpayers $22.5 million through penalties and indemnified loans. The MRB works with HUD's Enforcement Center to ensure the public trust and protect agency interests against regulatory and other violations.