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untanglingwebs
El Supremo
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Some individuals never even made their first payment! lengthy report 48 pages
Date Issued: July 22, 2010
Audit Memorandum No.: 2010-CH-1808
File Size: 1.13 MB
Title: Mac-Clair Mortgage Corporation, Flint, MI, Did Not Properly Underwrite a Selection of FHA Loans
The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General (OIG) reviewed 20 Federal Housing Administration (FHA) loans that Mac-Clair Mortgage Corporation (Mac-Clair) underwrote as an FHA direct endorsement lender. Our review objective was to determine whether Mac-Clair underwrote the 20 loans in accordance with FHA requirements. This review is part of “Operation Watchdog”, an OIG initiative to review the underwriting of 15 direct endorsement lenders at the suggestion of the FHA Commissioner. The Commissioner expressed concern regarding the increasing claim rates against the FHA insurance fund for failed loans. Mac-Clair did not properly underwrite 7 of the 20 loans reviewed because its underwriters did not follow FHA’s requirements. As a result, FHA’s insurance fund suffered actual losses of $562,551. Further, Mac-Clair’s direct endorsement underwriters incorrectly certified that due diligence was used in underwriting the seven loans.
We recommend that HUD’s Associate General Counsel for Program Enforcement determine legal sufficiency and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act against Mac-Clair and/or its principals for incorrectly certifying to the integrity of the data or that due diligence was exercised during the underwriting of seven loans that resulted in losses to HUD totaling $562,551 which could result in affirmative civil enforcement action of approximately $1,177,602. We also recommend that HUD’s Deputy Assistant Secretary for Single Family take appropriate administrative action against Mac-Clair and/or its principals for the material underwriting deficiencies cited in this report once the affirmative civil enforcement action cited in Recommendation 1A is completed.
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Sun Aug 15, 2010 10:27 pm |
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untanglingwebs
El Supremo
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Report: Mac-Clair Mortgage Corporation failed to properly underwrite certain Federal Housing Administration loans, may face civil action
Published: Thursday, August 26, 2010, 9:40 AM
Melissa Burden | Flint Journal
BURTON, Michigan — A local mortgage company and/or its owner may have to pay $1.18 million after a probe into the company by a government watchdog agency found it failed to properly underwrite seven of 20 Federal Housing Administration loans it reviewed.
Mac-Clair Mortgage Corp. underwriters failed to follow FHA requirements on seven loans, which cost FHA’s insurance fund $562,551, according to a July 22 report issued by the U.S. Department of Housing and Urban Development’s Office of Inspector General.
No formal disciplinary action has been taken against the company, said Brian Sullivan, a HUD spokesman.
Bernie Cason, owner of Mac-Clair Mortgage that moved from Flint Township to 4355 S. Saginaw St. in Burton in June and expects to close its doors in the next few weeks, said the report found no fraud. Cason said he disagrees with the OIG’s findings and issued a formal rebuttal about four weeks ago.
“OIG doesn’t have guidelines because they’re not an underwriting authority,” he said. “Our attorney is advising us six of the seven (loans) should be dismissed.”
Mac-Clair Mortgage was among 15 companies nationwide, and one of three in Michigan, that the OIG said in January it would review because of their unusually high number of defaults on FHA loans, much higher than the national average.
As direct endorsement lenders, the companies have the authority to underwrite the loans without prior FHA approval.
FHA has become a major source of financing for first-time homebuyers, but has also seen its loses rise dramatically. FHA insures mortgages, and when a loan goes into default and foreclosures, FHA pays an insurance claim to the lender, Sullivan said.
Between November 2007 and December 2009, Mac-Clair endorsed 2,856 FHA loans valued at more than $309 million and submitted 458 claims to the FHA insurance fund worth more than $41.4 million, according to the report.
OIG found that seven of the 20 loans it reviewed were noncompliant with FHA/HUD regulations in areas such as income, liabilities, gift funds, credit report and verification of rent.
The July 22 report from the OIG recommends HUD officials pursue remedies against Mac-Clair including possible civil enforcement action of about $1.18 million and administrative action against the company for its underwriting deficiencies. The figure is double the loss to the FHA fund, plus a $7,500 fine for each of the seven loans.
HUD enforcement staff are reviewing the OIG’s report, Sullivan said.
Cason said he is working with HUD on remedies, but called underwriting “an art,” and said there are exceptions to every rule in HUD’s underwriting guidelines.
In its rebuttal letter, Mac-Clair said staff “strive to comply with applicable rules and regulations” and that most of the loans reviewed defaulted as a result of a borrower having “unforeseen economic or personal setbacks.”
“These are unfair, biased decisions, uneducated decisions they made,” he said.
Cason also said it was unfair for OIG to compare his default ratios and claims against the FHA insurance fund to default rates in places such as Denver.
He said his company’s default rate was higher than others was because it does 75 percent of its business in Genesee County and that both Flint and Michigan had higher default rates on FHA loans than the rest of the country. In Mac-Clair’s rebuttal letter, the company said FHA loans consisted of about 65 percent of business from 2007 to June.
“It was a political move to begin with,” Cason said. “The OIG and HUD is going to be victorious in forcing companies to go out of business in high default cities.”
Cason said he is winding down his business.Mac-Clair, which has been in business since 1970 and had been in Flint Township since 1999, now has only about five employees.
In January, the company had about 55 employees, according to Flint Journal files.
Some of his employees stayed with his wife Kristi Cason, who this summer bought Cason Home Loans and stayed at Mac-Clair’s former Miller Road location.
“It just kept withering and withering down and it just made the most sense to just close the doors,” he said.
Mac-Clair Mortgage has had 20 complaints filed with the Michigan Office of Financial and Insurance Regulation dating back to 1999, said Jason Moon, an OFIR spokesman. The complaints against Mac-Clair were for advertising and marketing, Moon said.
Moon said there has been no public regulatory action against the company, but that he couldn’t comment if there are any active investigations against company.
Cason Home Loans is registered in Michigan to do business under J. Virgil Inc. based in Bay City, Moon said.
Related topics: Burton, Flint Business, Flint Township |
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Thu Aug 26, 2010 1:16 pm |
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CharmelW
F L I N T O I D
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It's good to hear that the involved we're caught. Another thing, the U.S. Department of Housing and Urban Development has programs that help low-income individuals to purchase homes through the Section 8 system. I read this here:
What to do if potential HUD fraud threatens your deposit
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Sad to say, purchasing a Housing and Urban Development home could be difficult, as one Bankrate.com reader named Bea notes. |
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Mon May 02, 2011 3:32 am |
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