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Mortgages Everett:

Trial by Press Release Another Example of Poor Journalism

Part 2 of 2

The suit further claims Ashley’s employment agreement required he be paid equivalent to one-half of a percentage point of the principal of every mortgage Lend America originated. Lend America originated nearly $1.1bn in loans in the financial year ending September 30, 2008. Accordingly, Ashley was entitled to nearly $5.4m in compensation during the year. In the suit, Justice claims this arrangement is a violation of HUD regulations. If proven this is a direct violation of RESPA (Real Estate Settlement and Procedures Act). They also don’t mention that he boosted sales by 500%.

The sales environment at Lend America resulted in the origination of at least 40 FHA loans that included various fraudulent documentation, the suit claims. The fraudulent documents range from verification of income and employment documents with incorrect information, to in one case, a hand written note, represented to FHA to be from a borrower’s parents indicating the parents would be moving in with the borrower and contributing to the mortgage payment, when in fact, the borrower told Lend America that arrangement would not happen.

The suit claims Lend America also created a slush fund of cash to fund delinquent mortgages for borrowers to conceal their inability to keep up with payments during the first two years of the loan, the period of time that HUD monitors its Direct Endorsers’ delinquency and default rates.

According to the Justice Department lawsuit, Ashley’s worked in a number of positions at mortgage firms, and by his own admission, committed his first act of mortgage fraud in 1989.

The article goes on about Mike Ashley’s checkered past. He has paid fines and was guilty of fraud in the past. He did his time and now has become very successful. HUD spent months of time investigating Lend America and found 40 bad loans, that’s true. What the article doesn’t mention is that is out of a total of 13,000 loans. That is .3077% a VERY small number.

In regard to these loans, if you read the Memorandum in Opposition that was filed by Lend America, Lend America states that the employees involved with the files in question have been terminated, the company is willing to indemnify HUD against losses, the company has not received any volume of repurchase requests, and the company has since taken corrective action including underwriting overlays, tightened QC procedures, and best practices such as pre-loan counseling and unemployment insurance.
The Memorandum of Opposition also states that HUD had terminated a Lend America branch due to the branch’s compare ratio. Lend America responded to the termination by filing suit. However, HUD later willingly reinstated the branch, and Lend America withdrew the suit. In case you are curious, HUD just reinstated the branch in August 2009. A copy of HUD’s withdrawal letter is included in the filing.

While the Complaint details some of the history of Michael Ashley, the Memorandum accompanying the complaint acknowledges that there isn’t verification that the officers of the corporation were involved or had direct knowledge of the allegations resulting from the audit. If you read the documents, you’ll see that the reason why Ashley’s prior history was brought up was to make the inference or presumption that Lend America might be a risk based on Ashley’s history because HUD simply had no proof. The complaint and statements from HUD officials also create the misconception that Ashley cannot work in the mortgage industry which is not substantiated based on the facts.

I am deeply troubled by the way that HUD has chosen to handle this matter. It appears that HUD’s intention was to assassinate the company via the court of public opinion by leaking information to a media source that is known to crucify companies and individuals. By taking such abrupt and public action, it appears that HUD was attempting to deny the company due process and destroy reputations. Understand that companies can be wiped out overnight by such reckless actions. I don’t see TARP institutions receiving this type of treatment, and suspect that said institutions have exponentially more than just 40 questionable files on their books.

My source for the above quotes is from Market Ticker Forum

I wondered why the DOJ couldn’t get an injunction. So I dug a bit deeper into this. It seems clear to me that HUD is looking for scapegoats. Back in the 1970’s we were taught not to trust the government seems they were right.

I used sources from the

Wall Street Journal

Market ticker forums

Housing Wire

There are more articles on mortgages Everett in other posts on my blog.

Every mortgage loan is very important to me, so I handle each one personally. My background includes extensive knowledge of the real estate market, real estate finance and personal taxation. If you are looking to refinance or purchase real estate please give me a call or email. I will be happy to discuss all options with you. Currently I have access to 70+ lenders. I have access to 4 different credit repair agencies. My goal is to become your lifetime lender. thefhaloanguy@aol.com