Fair And Fraudulent Mortgage Lending

To think that fraudulent mortgage lending practices will simply go away because regulators want them to would be the height of naivete. In fact, given the challenging economic times, I think one could make a case that fraudulent mortgage practices may actually increase on a relative basis. How so? Desperate people will always do desperate things, including fraudulent and criminal acts.

Where can one go to receive a fair deal in the process of getting mortgage financing? What parts of the mortgage market may represent the next wave of fraud? Which firms may currently be involved in these frauds?

Major “high five” to KD and our friends at 12th Street Capital for providing tremendous perspectives on these topics this morning. KD writes:

From the Fair Mortgage Collaborative website . . .

The Fair Mortgage Collaborative is a nonprofit membership organization whose members are individually and collectively committed to providing low and moderate income and minority homeowners and homebuyers access to mortgages with the consumers’ best interests at its core, at a fair rate of compensation. Our approaches and standards work for all homeowners and homebuyers.

KD’s comment: While I certainly applaud their effort, I would make the friendly suggestion they should be looking at FHA lenders and Reverse Mortgage lenders in particular..for those are the bastions of future (and current) abuses.”

Sense on Cents will also not unilaterally bless this organization, but it may be a decent place to start in hopes of finding fair lending practices. Speaking of which, an organization you may care to avoid is Taylor, Bean, and Whitaker Mortgage as the following story from Bloomberg highlights. Obviously TBW, as with any individual or organization, is entitled to due process but until this case is adjudicated, consumers may fare better going elsewhere. KD highlights the Bloomberg story as follows:

Aug. 4 (Bloomberg) - Taylor, Bean and Whitaker Mortgage Corp., the Florida home lender that offered $300 million to save Colonial BancGroup Inc., was barred from making new loans guaranteed by the Federal Housing Administration.

The FHA, citing concern about possible fraud, plans to sanction two top officials at Ocala-based Taylor Bean for providing “false” information to the agency, according to an FHA statement today.

Agents bearing federal warrants searched Colonial’s Orlando offices yesterday, and the Ocala, Florida Star-Banner reported a similar search at closely held Taylor Bean. The firm ranked 12th among U.S. mortgage originators (KD’s comment: I think they were 3rd in FHA lending behind B of A and Wells) in the first half of this year with $17 billion of loans, according to industry newsletter Inside Mortgage Finance.

Taylor failed to submit a required annual financial report and “misrepresented that there were no unresolved issues with its independent auditor,” the FHA said. The auditor discovered “irregular transactions that raised concerns of fraud,” according to the FHA statement.”

KD’s comment: Here is the official HUD News Release on this topic. It is probably even more painful that TBW will be losing their $25bln FHA servicing portfolio and the word on the street is that it will be moved to Bank of America.

Thank you KD and 12th St. Capital for providing these awesome insights and helping us collectively navigate the economic landscape.