HUD subpoenas 15 mortgage companies

CHICAGO — The U.S. Department of Housing and Urban Development said it is taking a closer look at 15 mortgage companies to determine why they had such high rates of problems with FHA-insured mortgages.

Those 15 companies were served subpoenas Tuesday, demanding documents and data related to failed loans that resulted in claims paid out by the Federal Housing Administration's mortgage-insurance fund, HUD Inspector General Kenneth M. Donohue and FHA Commissioner David H. Stevens 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," Donohue said in a news release.

Stevens said the initiative "will help us determine whether there is fraud and better manage risk in the long run." The FHA is also implementing other changes to reduce risk, including some that are scheduled to be announced later this month, Stevens said.

As the financial crisis crippled conventional lending, the FHA has expanded its role in the mortgage market. Where three years ago it held only about 3 percent of the market, it now accounts for as much as 25 percent of all mortgage activity.

"The FHA market share has skyrocketed," Donohue said. "Our job is oversight."

"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," Donohue said.

Below are the companies that received subpoenas from HUD's Office of Inspector General on Tuesday:

• First Tennessee Bank N.A., Memphis, Tenn.

• Alethes LLC, Lakeway, Texas

• Security Atlantic Mortgage Co., Edison, N.J.

• Pine State Mortgage Corp., Atlanta.

• Birmingham Bancorp Mortgage Corp., West Bloomfield, Mich.

• Alacrity Financial Services, LLC, Southlake, Texas

• Assurity Financial Services, LLC, Englewood, Colo.

• D and R Mortgage Corp., Farmington, Mich.

• Webster Bank, Cheshire, Conn.

• Mac-Clair Mortgage Corp., Flint, Mich.

• Americare Investment Group, Inc., Arlington, Texas

• 1st Advantage Mortgage, Lombard, Ill.

• American Sterling Bank, Independence, Mo.

• Sterling National Mortgage Co Inc., Great Neck, N.Y.

• Dell Franklin Financial LLC, Columbia, Md.