Feds subpoena 15 mortgage lenders

MANATEE — Federal housing officials are taking a closer look at 15 mortgage companies with unusually high default rates on Federal Housing Administration-backed loans.

Officials on Tuesday served subpoenas requesting documents and data from the companies, some which have done a little business in Manatee County.

FHA and the U.S. Department of Housing and Urban Development’s inspector general said they want to know why those companies’ default rates and insurance claims are so high, which could indicate fraud was involved. None of the companies are officially under investigation.

“Many of these target loans didn’t last but a short time before defaulting,” said Kenneth Donohue, the inspector general. “We will conduct an investigation, if appropriate, to determine who is responsible and will recommend that appropriate action be taken against individuals and corporations.”

FHA said about 5 percent of loans it insures against default actually fail, but the 15 companies’ default rates have been significantly higher in recent years. For example, almost 20 percent of loans made by Alethes LLC of Lakeway, Texas, in the past two years have failed.

“We are reviewing each of these files to determine what commonalities there are, if any,” Alethes President Danny Smith wrote in an e-mail to the Associated Press.

The subpoenas focus on failed loans made from 2006 to 2008, during the height of the U.S. housing boom.

The lenders are 1st Advantage Mortgage of Lombard, Ill.; Alacrity Financial Services LLC, of Southlake, Texas; Alethes; American Investment Group Inc. of Arlington, Texas; American Sterling Bank of Independence, Mo.; Assurity Financial Services LLC of Englewood, Colo.; Birmingham Bancorp Mortgage Corp. of West Bloomfield, Mich.; D and R Mortgage Corp. of Farmington, Mich.; Dell Franklin Financial LLC of Columbia, Md.; First Tennessee Bank N.A, of Memphis, Tenn.; Mac-Clair Mortgage Corp. of Flint, Mich.; Pine State Mortgage Corp. of Atlanta; Security Atlantic Mortgage Co. of Edison, N.J.; Sterling National Mortgage Co., Inc. of Great Neck, N.Y.; and Webster Bank of Cheshire, Conn.

Ten of those lenders have originated 240 mortgage loans in Manatee since 1985, with half of those by First Tennessee, according to public records.

A local mortgage broker who specializes in FHA-insured loans said those are small lenders that might not have had the level of internal oversight that larger lenders use.

“They’re probably not big enough to have a compliance underwriter and a second or third set of eyes checking everything out,” said Pete Minarich of Real Estate Mortgage Network, based in Bradenton.

But their high default rates do not necessarily mean that fraud was involved, he said.

“It could be loan officers trying to pull through a fast one, hoping no one would catch it, or it could just be a run of bad loans and it’s very innocent,” Minarich said. “There could be an array of many reasons.”

The Associated Press contributed to this report.