HUD takes action against mortgage lenders for bogus fees

August 12, 2015

WASHINGTON (8/12/15)--A scheme that allegedly led to improper inflation of mortgage costs has led the U.S. Department of Housing and Urban Development’s Mortgagee Review Board (MRB) to take action against two lenders. Texas-based American Home Free Mortgage LLC and R.H. Lending Inc. have agreed to a permanent withdrawal of their Federal Housing Administration (FHA) approval.

According to the MRB, American Home Free Mortgage artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager.

The company will pay a civil money penalty of $169,419, but according to HUD, it did not admit fault or liability with respect to the allegations.

The MRB also alleged R.H. Lending took part in a scheme to disguise fees charged to borrowers as legitimate construction fees, but for which no work was performed, thus creating an inflated mortgage for the borrowers and increasing FHA’s exposure to loss. R.H. Lending did not admit fault or liability.

The board is designed to consider evidence brought against FHA-approved lenders for violations of the agency’s program requirements. Serious violations can cause a lender to forfeit any future participation in FHA programs.