|HUD No. 11-258
November 1, 2011
HUD SUSPENDS ALLIED HOME MORTGAGE CORP. AND CEO
Ginnie Mae also suspends the Houston-based lender's ability to issue securities
WASHINGTON - The U.S. Department of Housing and Urban Development's Mortgagee Review Board (MRB) today immediately suspended Allied Home Mortgage Corporation, thereby preventing the company from originating and underwriting new mortgages insured by the Federal Housing Administration (FHA). HUD is also suspending the company's president and chief executive officer, James C. Hodge, and proposing to debar him as well as the company's executive vice president, Jeanne L. Stell.
In addition, the Government National Mortgage Association (Ginnie Mae) is suspending the Houston-based lender's ability to issue securities in its Mortgage-Backed Securities (MBS) program.
The MRB's and Ginnie Mae's suspension of Allied comes as the U.S. Attorney in Manhattan filed a lawsuit against the company, Allied Home Mortgage Capital Corporation, Hodge and Stell on multiple charges of mortgage fraud and for violating numerous FHA requirements.
During a news conference in New York announcing the government's actions, HUD's General Counsel Helen Kanovsky said, "We will not tolerate mortgage lenders who play fast and loose with FHA's standards. These defendants demonstrated a pattern of recklessness and utter disregard for how we do business. They've harmed FHA, hurt homeowners, and now they'll be held to account for their actions."
FHA and Ginnie Mae are imposing these actions because Allied originated loans from un-approved branch offices in violation of FHA requirements and then concealed these violations by submitting knowingly false information. HUD's MRB found the following violations:
- Allied violated HUD/FHA requirements when it originated loans from branch offices that were not FHA-approved. HUD requires that all loans originated and submitted to HUD for FHA mortgage insurance must be originated at a branch office that has been approved by HUD. For every loan that a mortgagee submits to HUD for FHA mortgage insurance, the lender must provide the FHA ID of the branch where the loan was originated. Allied originated loans from branch offices that were not FHA-approved. Allied concealed its violations of HUD/FHA requirements by submitting the improperly-originated loans under the FHA ID of approved branch offices.
- Allied submitted false information to HUD when it submitted loan packages to HUD for FHA mortgage insurance that contained false information about where the loans were originated. Allied submitted false information to HUD when it submitted loan packages to HUD for FHA mortgage insurance that contained false information about where the loans were originated. HUD requires that all loans originated and submitted to HUD for FHA mortgage insurance must provide the FHA ID of the branch where the loan was originated. Allied submitted loans to HUD for FHA mortgage insurance that contained false representations about where the loans were originated.
- Allied violated HUD/FHA requirements when it failed to ensure that the corporate entity paid the operating expenses of the FHA-approved branch offices. HUD requires that lenders pay all of the operating expenses incurred at the branch offices involved in originating FHA-insured loans. Operating expenses include equipment, furniture, office rent, overhead, employee compensation, and similar expenses. Allied failed to pay the operating expenses for some of its approved branch offices.
- Allied failed to implement a Quality Control ("QC") Plan in compliance with HUD/FHA requirements. Allied failed to implement a Quality Control ("QC") Plan in compliance with HUD/FHA requirements. HUD requires that FHA-approved lenders review 10% of the loans it originates and all the loans that go into default into default within the first six payments. The findings from these reviews are required to be reported to the lender's senior management. HUD also requires that lenders conduct site reviews of their offices to ensure compliance with HUD requirements. Allied utilized inadequate and unqualified staff for its reviews.
- Allied submitted false certifications to HUD when it submitted its annual recertification materials to HUD for the years 2006-2011. Allied submitted false certifications to HUD when it submitted its annual recertification materials to HUD for the years 2006-2011. HUD requires that the lender, when seeking to renew its FHA approval status, certify that it "complied with and agrees to continue to comply with HUD-FHA regulations, handbooks, Mortgagee Letters… policies, and terms of any agreements entered into with the Department." The FHA-approved lender must also certify that it "conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval." Allied made these certifications on a yearly basis from 2006 through 2011. Each of these certifications was false because Allied had failed to implement a Quality Control ("QC") Plan in compliance with HUD/FHA requirements, as set forth more fully in Violation 4.
- Allied employed a principal, officer and director when such person was suspended.
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 http://espanol.hud.gov. You can also follow HUD on twitter @HUDgov, on facebook at www.facebook.com/HUD, or sign up for news alerts on HUD's News Listserv.
Ginnie Mae is a wholly owned government corporation within the U.S. Department of Housing and Urban Development. Ginnie Mae pioneered the mortgage-backed security (MBS), guaranteeing the very first security in 1971. An MBS enables a mortgage lender to aggregate and sell mortgage loans as a security to investors. Ginnie Mae securities carry the full faith and credit of the United States Government, which means that, even in difficult times, an investment in Ginnie Mae is one of the safest an investor can make. More information about HUD and Ginnie Mae is available on the Internet at www.hud.gov, http://espanol.hud.gov. and www.ginniemae.gov.