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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.
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(9 days 2 hours ago.)