|HUD No. 09-226
December 7, 2009
FHA SUSPENDS EQUITABLE TRUST MORTGAGE CORP
Baltimore lender overcharged minority borrowers
WASHINGTON - The Federal Housing Administration (FHA) today announced that it is immediately suspending Equitable Trust Mortgage Corporation (ETM) of Baltimore, Maryland, thereby preventing the Company from originating and underwriting new FHA-insured mortgages. FHA is imposing this action because ETM improperly overcharged 37 borrowers for broker and loan origination fees in excess of what the U.S. Department of Housing and Urban Development currently allows. HUD discovered that these unauthorized fees were charged to a substantially greater percentage of minority borrowers (68 percent) than non-minorities.
HUD's Mortgagee Review Board (MRB) also found that, in 21 cases, ETM failed to properly disclose all loan origination fees, as well as lender fees to mortgage brokers (commonly called 'yield spread premiums'), on borrowers' Good Faith Estimates. In addition, the Company's loans have a high default rate, well in excess of the national average.
"It is critical that FHA lenders apply our standards and do not overcharge borrowers," said FHA Commissioner David Stevens. "The fact that a disproportionate number of these borrowers were minority families is also troubling. I am fully committed to protecting consumers and the fiscal health of the FHA."
FHA limits the total loan origination charges a borrower is required to pay to one percent of the mortgage amount. In this case, FHA found that ETM charged borrowers both a broker fee and an additional one percent origination fee. By charging both a broker and an origination fee totaling more than one percent of the loan amount, ETM received excessive compensation and improperly charged consumers duplicative and unreasonable fees to originate their loans.
HUD's Office of Inspector General is also investigating ETM's lending practices. The Company was immediately suspended for a minimum of six months due to the seriousness of these violations, as well as the inherent risk to FHA's insurance fund and American taxpayers. ETM may appeal its immediate suspension by submitting a written request for a hearing before an Administrative Law Judge within 30 days. Such a request will not delay the action FHA is announcing today.
HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov. You can also follow HUD on twitter @HUDnews, on facebook at www.facebook.com/HUD, or sign up for news alerts on HUD's News Listserv.