Violations of FHA origination and underwriting requirements may lead to lenders losing their ability to issue FHA loans.

Both FHA and Ginnie Mae have withdrawn their approvals for Lend America (also known as Lending Key and Ideal) based on numerous violations of FHA origination and underwriting requirements. The U.S. Department of Housing and Urban Development’s Mortgagee Review Board (MRB) took the action based upon two notices of violation issued to Lend America last month.

Lend America has been accused of failing to document borrowers’ income and creditworthiness and for submitting false certifications to HUD. Says FHA Commissioner David Stevens, “We have no tolerance for lenders who abuse their FHA approval. The evidence in this case points to a disturbing pattern of senior officials and underwriters, either not knowing what they were doing, or not caring. Therefore, Ideal has been immediately withdrawn from participating in the FHA-insured mortgage program.”

HUD issued a laundry list of violations for Lend America, including approving loans that did not meet minimum credit requirements, failing to document the source of funds needed to close loans, charging excessive mortgage broker fees, and submitting false certifications to HUD in its Yearly Verification Report.

Important to note is the requirement to document the funds needed to close. For those who are receiving money from friends or relatives to apply towards their closing costs or down payment, you need to be careful that there is an adequate paper trail. According to local lenders, the best way to do this is to get a personal check for the amount of the gift, and provide a copy of the cleared check to your lender. This means that you’ll need to think ahead a bit, since the check will need to clear your bank before you can have your deposit check delivered to escrow. A cashiers check or wire transfer doesn’t create an adequate paper trail, so avoid these if at all possible.

Santa Clarita Realtor Linda Slocum is a Certified Distressed Property Expert (CDPE) and Certified Residential Specialist (CRS) specializing in Santa Clarita residential real estate, foreclosures and short sales. You can reach her at 661.670.0349 or at Linda@SantaClaritaRealEstateBlog.com. To search for Santa Clarita homes, use our neighborhood search tools or visit HoneyStartPacking.com.

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