WASHINGTON – Jan. 13, 2010 – U.S. Department of Housing and Urban Development (HUD) Inspector General Kenneth M. Donohue and Federal Housing Administration (FHA) Commissioner David H. Stevens announced yesterday an initiative focusing on mortgage companies with significant claim rates against the Federal Housing Administration’s mortgage insurance program.

HUD’s Office of Inspector General (OIG) subpoenas were served to the corporate offices of 15 mortgage companies across the country demanding documents and data related to failed loans that resulted in claims paid out by the FHA mortgage insurance fund.

“The goal of this initiative is to determine why there is such a high rate of defaults and claims with these companies and whether there is wrongdoing involved,” says Inspector General Donohue. “We aren’t making any accusations at this time; we have no evidence of wrongdoing; but we will aggressively pursue indicators of fraud. We are members of the President’s Financial Fraud Enforcement Task Force, and today’s activities reflect our commitment to seeking information on red flags that may arise from data analysis.”

“The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage,” says FHA Commissioner David Stevens. “These are key indicators of problems at the origination or underwriting stages. The HUD OIG wants to see why these loans failed.”

Actions available to the HUD OIG include audits, investigations, and inspections and evaluations. The Department of Justice (DoJ), state and local law enforcement could pursue both civil and criminal legal actions against wrongdoers. HUD is available to proceed with administrative sanctions such as suspensions, limited denial of participation, debarment and civil monetary penalties.

This probe is a new approach for HUD OIG, which is now focusing on corporate offices rather than individual branch offices.

The following companies were served OIG subpoenas:

• First Tennessee Bank N.A., Memphis, TN
• Alethes LLC, Lakeway, TX
• Security Atlantic Mortgage Co., Edison, NJ
• Pine State Mortgage Corporation, Atlanta, GA
• Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
• Alacrity Financial Services, LLC, Southlake, TX
• Assurity Financial Services, LLC, Englewood, CO
• D and R Mortgage Corporation, Farmington, MI
• Webster Bank, Cheshire, CT
• Mac-Clair Mortgage Corporation, Flint, MI
• Americare Investment Group, Inc., Arlington, TX
• 1st Advantage Mortgage, Lombard, IL
• American Sterling Bank, Independence, MO
• Sterling National Mortgage Company Inc., Great Neck, NY
• Dell Franklin Financial LLC, Columbia, MD

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