The US Department of Housing and Urban Development (HUD) last week served subpoenas on 15 mortgage companies nationwide seeking information on failed FHA loans. The subpoenas part of a program reviewing FHA approved mortgage lenders with “significant” foreclosure rates.

The companies are:

•First Tennessee Bank, Memphis, TN
•Alethes, Lakeway, TX
•Security Atlantic Mortgage Co., Edison, NJ
•Pine State Mortgage Corporation, Atlanta, GA
•Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
•Alacrity Financial Services, Southlake, TX
•Assurity Financial Services, 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, Great Neck, NY
•Dell Franklin Financial, Columbia, MD

Senate Banking Committee Chairman Chris Dodd and House Financial Services Chairman Barney Frank sent a letter to the heads of the bank regulatory agencies asking them to address whether banks are inflating the value of 2nd mortgages on their balance sheets. They stated in the letter that these inflated values discouraged proactive efforts to modify and restructure mortgage loans and “crippled” programs designed to prevent foreclosures. The letter further states, “Across the country housing prices have dropped and many Americans owe far more on their mortgages than their homes are worth.” The Appraisal Institute commented on the letter by stating, “The letter was generated in an effort to make available refinancing opportunities for struggling homeowners who are currently not eligible for mortgage modifications because their loans do not reflect current market values.”

The U.S. House of Representatives passed the Mortgage Reform and Anti-Predatory Lending Act of 2009. The bill, H.R. 1728, passed by a vote of 300 to 114 on May 7, 2009. The bill includes provisions that will impact appraisers including:

  • Requirements for complete interior inspection appraisals for all subprime loans;
  • Establishment of a federal appraisal independence standard with significant monetary penalties for violations;
  • Modernizing provisions of Title XI of FIRREA to provide additional resources for state enforcement and greater accountability of federal and state appraisal regulators;
  • Required separation and clear disclosure of fees paid to appraisers and fees paid for appraisal administration (i.e., fees paid to appraisal management companies);
  • Limitations on the use of broker price opinions in loan origination; and
  • Registration requirements, and a regulatory framework, for Appraisal Management Companies, with mechanisms to prohibit infiltration by appraisers sanctioned by state regulatory agencies.

The bill now will be considered by the SenateSenate Banking Committee. There is no timetable yet for its consideration.