HUD No. 03-100
October 2, 2003
HUD SETTLES CASE AGAINST NATIONAL LENDER ACCUSED OF INFLATING COST OF CREDIT REPORTS
Allied Mortgage agrees to abide by RESPA and to avoid "upcharging"
WASHINGTON - The Department of Housing and Urban Development today announced a settlement agreement with Allied Home Mortgage Capital Corporation, a large real estate lender that makes home loans throughout the country. HUD alleged Allied violated the Real Estate Settlement Procedures Act (RESPA) by charging consumers more than the cost of their credit reports, a practice commonly known in the mortgage industry as "upcharging."
RESPA is a federal statute designed to prohibit kickbacks, referral fees and other unearned charges that artificially drive up the price consumers pay to buy or refinance their homes. Specifically, current regulations make it illegal "to charge or accept a fee or part of a fee where no service has actually been performed."
John C. Weicher, HUD's Assistant Secretary for Housing and Federal Housing Commissioner told hundreds of FHA-approved lenders meeting in Washington today, "RESPA speaks directly to the practice of upcharging in mortgage finance transactions. Tacking on additional costs to the consumer when there's no associated service involved is not only a disservice to consumers but a violation of the law."
HUD alleges that for more than two years between January of 2000 through May of 2002, Allied overcharged certain borrowers for the cost of credit reports. Allied agreed to abide by the statutory and regulatory requirements of RESPA and to pay $370,000 to the U.S. Treasury. The Company also committed to avoid upcharging for credit reports and other third party settlement services and to annually audit the closing practices of its branch offices. Where upcharging is found by HUD, Allied or other auditors, the Company agreed to eliminate it, to take appropriate action against responsible Allied employees, and to repay borrowers any excess charge in a timely manner.
Based on HUD's Homebuyer Bill of Rights, Secretary Mel Martinez last year proposed a sweeping reform of RESPA's regulatory requirements in an effort to greatly simplify and clarify the homebuying process for consumers. In addition, the Department has significantly increased its enforcement effort to further protect consumers from junk fees, unearned costs and other charges that unnecessarily inflate the price of buying or refinancing a home.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet.