Property Damage & Disaster Restoration Blog: Long Island & New York City

HUD Inspector General Probes Mortgage Companies With Significant Claim Rates

Posted on Fri, Jan 15, 2010 @ 12:12 PM

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

HUD 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 which resulted in claims paid out by the FHA mortgage insurance fund.

Inspector General Donohue said, "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. 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.

" This initiative was prompted, in part, by the FHA Commissioner, David Stevens, who was alarmed by the incidence of claims against the FHA insurance fund by a number of poor performing companies and reached out to the HUD OIG for assistance.

FHA Commissioner David Stevens said, "We are taking risk management extremely seriously. In addition to the policy changes we are implementing and additional changes we plan to announce later this month, we need to hold FHA lenders accountable for the high rates of defaults and claims against FHA. The Inspector General's initiative will help us determine whether there is fraud and better manage risk in the long run.

" 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. These are key indicators of problems at the origination or underwriting stages. The HUD OIG wants to see why these loans failed.

Some actions available to the HUD OIG are audits, investigations, and inspections and evaluations. In addition, we rely on the support of the Department of Justice (DoJ), and of State and local law enforcement. The DoJ is available to 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.

The probe will be conducted by the HUD OIG's Audit and Investigation staff jointly. They will assess why these companies have high default rates, especially at this unprecedented time when the FHA mortgage insurance program represents such a significant percentage of mortgages currently in force in our country.

This probe is a new type of approach in which HUD OIG is focused on corporate offices rather than individual branch offices. This is a starting point for more detailed reviews if abuses are uncovered, and the HUD OIG anticipates that more probes may follow.

"The FHA market share has skyrocketed," Inspector General Donohue further said. "Our job is oversight. We work for the American taxpayer. Each loan on this list will be thoroughly examined and we will track down the reasons why it failed. Once we determine the causes, we will look to see whether there is a need for further review or remedial action. We want to send a message to the industry that as the mortgage landscape has shifted we are watching very carefully and that we are poised to take action against bad performers."

    The following companies were served OIG subpoenas today:

    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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For more information, visit the HUD Website.

The Department of Housing and Urban Development Office of Inspector General is statutorily authorized to detect and prevent waste, fraud and abuse, and to promote the effectiveness and efficiency of government operations. The Federal Housing Administration provides mortgage insurance on loans by FHA-approved lenders throughout the United States and its territories. The FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world.

Tags: 203(k) loan, property damage, foreclosures, hud loan, advanced restoration, restoration, suffolk county restoration, restoration company, disrepair, home repair, buying a home, refinance, 203k, 203k streamline, rehab, mortgage companies

FHA 203K Rehab Loan Q&A Summary

Posted on Mon, Dec 21, 2009 @ 11:13 AM
If you are thinking about purchasing a foreclosure in disrepair (needs rehabilitation), you should look into applying for an FHA 203k loan. The 203k program is HUD's primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities.
Listed below are some general questions & answers regarding 203k loans to help you better understand the 203k concept:


Is the Section 203(k) program restricted to single-family dwellings? No. The program can be used for one-to-four unit dwellings. Maximum mortgage limitations are the same as for properties under Section 203(b).
Can Section 203(k) be used to improve a condominium unit? Yes, however, condominium rehabilitation is subject to the following conditions:
A. Owner/occupant and qualified nonprofit borrowers only;
B. Rehabilitation is limited only to the interior of the unit. Mortgage proceeds are not to be used for the rehabilitation of exteriors or other areas which are the responsibility of the condominium association, except for the installation of firewalls in the attic for the unit;
C. Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;
D. The maximum mortgage amount cannot exceed 100 percent of the after-improved value. After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.

Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof). Similar to a project with a condominium unit with a mortgage insured under Section 234(c) of the National Housing Act, the condominium project must be approved by HUD prior to the closing of any individual mortgages on the condominium units.


Can a six (or more) unit building be done using the 203(k) program? No. However, the building could be renovated and reduced to a four unit building.

Can nonresidential (storefront) property be eligible for a 203(k) insured loan? Yes. Mixed-use residential property is acceptable provided the property has no greater than 25% (for a one story building); 33% (for a three story building); and 49% (for a two story building) of its floor area used for commercial (storefront) purposes. The rehab funds can only be used for the residential functions of the dwelling and areas used to access the residential part of the property.
Can HUD-owned properties be purchased using the 203(k) loan? Yes. However, the property must be advertised that it is eligible for financing with a 203(k) loan. If the HUD-owned property is purchased with other funds, a 203(k) loan can be made after the property is in the buyers name. In this case, cash back will be allowed to the borrower for a period of six months from purchasing the HUD-owned property.
Can an investor use the 203(k) program?
No. In October, 1996, the Department placed a moratorium on investor participation in the 203(k) Rehabilitation Mortgage Program.

Can a local government agency or a nonprofit organization use the 203(k) program?
Yes. The same qualification requirements will be used as for an owner-occupant of the property.

What is the definition of a First-Time Homebuyer?
A single person or an individual and his or her spouse who have not owned a home (as a tenant in common or as a joint tenant by the entirety) during the three years immediately preceding the date of application for the 203(k) loan. Any individual who is legally separated or divorced cannot be excluded from consideration, because the three-year waiting period does not apply, provided the individual no longer has an interest in the home.

Tags: 203(k) loan, homeowner, property damage, fire restoration, restoration companies, fha, advanced restoration, emergency service, homeowner tips, rebuild, home repair, buying a home, refinance, 203k, 203k streamline, rehab

Completing Your Dream Home with the FHA 203K Loan

Posted on Wed, Dec 09, 2009 @ 04:05 PM
Another challenge with the existing home inventory on the market is the condition of the property.  Whether it is REOs, foreclosures, short sales, or not, less people are presenting homes for sale in pristine condition.

The FHA 203k loan can help. The 203k can give the buyer the ability to have one loan to purchase and renovate their home at the same time.

Similar to a traditional mortgage with a construction loan added on top, the 203k can be used for the following:
  • Remodeling bathrooms and kitchens (even built-in appliances) 
  • Replacing a roof, gutters and downspouts
  • Adding a second story, afamily room,another bath, etc.
  • Completing a basement or attic
  • Upgrading plumbing, heating, air conditioning or electrical service
  • Installing new siding, energy efficient windows and doors
  • AND MUCH MORE!
It is important to hire a general contractor that is familiar with the 203k process and requirements.  Advanced Restoration Corporation, a 203k contractor, was recently featured on NBC News4 New York regarding 203k loans, along with Continental Home Loans.

For more information on 203k loans in New York, please contact the following:

203k Contractor:
Company:  Advanced Restoration Corporation
Contact:  Gary Matzelle
Phone:  (516) 903-4107
Email:  gmatzelle@advancedrestoration.com

Mortgage Banker:
Company:  Continental Home Loans
Contact:  Robert Flower
Phone:  (917) 584-9292
Email:  rflower@cccmtg.com

Looking for REO/Foreclosures?
The REO People
Thomas Becker (Licensed Real Estate Salesperson)
Phone:  (631) 873-8150
Email:  tomsellinghomes@aol.com

Tags: disaster, foreclosure, 203(k) loan, property damage, restoration companies, fha, hud loan, reconstruction, restoration, homeowner tips, restoration company, disrepair, resources, refinance, 203k, hud, 203k streamline, rehab

Why Renovate With a 203K Streamlined Loan?

Posted on Mon, Sep 28, 2009 @ 02:19 PM

Because You Can!

I'll keep this very brief...


You are purchasing a home that needs minor repairs (repairs under $35,000 qualify for a streamlined loan). Incorporating the rehab into your mortgage payment allows you to have just one payment. Some highlights include:

  • Loan amounts up to 110% of the home's appraised value; renovation amounts up to $35,000.
  • No work write-up, no inspection required if repairs are less than $15,000 and no HUD consultant required.
  • There is no longer a minimum of $5,000 in repairs for a 203K Streamline.
  • On a 203K Streamline, up to 50% of the rehab amount can be requested immediately following the closing. After closing the work can start.
  • For a 203K Streamline, there is a maximum of 2 draws per contractor.
  • Loan can be used for many improvements, including repair/replacement of: roofs, plumbing, electrical, flooring, minor remodeling, windows, doors, etc.
  • Available for mortgage refinance transactions including those where the property is owned free and clear.

203K Streamlined Loans are available through HUD approved lenders. For more information on how Advanced Restoration can be your 203k contractor, please contact Gary Matzelle at (516) 903-4107.

Tags: foreclosure, 203(k) loan, mortgage, fha, advanced restoration, disrepair, rebuild, home repair, buying a home, 203k, hud, 203k streamline, rehab

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