State regulators said Wednesday that they have ordered a large mortgage broker to stop making loans to Marylanders after federal investigators alleged the company had violated lending rules.

The U.S. Department of Housing and Urban Development announced last week that it was no longer allowing Allied Home Mortgage Corp. to originate loans insured by the Federal Housing Administration because it said the company had played "fast and loose with FHA's standards."

The Justice Department is alleging mortgage fraud in a lawsuit against Allied.

Maryland's Department of Labor, Licensing and Regulation suspended Allied's license Tuesday to prevent the Texas-based company from making any new loans in the state, other than those already in process.

Allied has nearly 100 loans in its pipeline intended for Marylanders trying to buy homes or refinance, including mortgages already approved to go to closing, the state said. Anne Balcer Norton, the state's deputy commissioner of financial regulation, said Allied did not appear able to close those loans because its funding sources have been frozen.

The state has ordered Allied to reimburse borrowers for out-of-pocket losses if closing does not occur.

Allied, which did not return a call seeking comment, is fighting in court to get its FHA lending rights reinstated. It describes itself as the fifth-largest FHA lender in the country.

The company had a notice on its website Wednesday saying it was making "special provisions" to get loans funded that day if they had been approved before Nov. 4. It said it expected to resume processing other loans Thursday.

But Norton said regulators in Maryland and other states believed that was inaccurate and have asked Allied to remove the notice from its site.

"We feel that's misleading and that needs to be changed," Norton said. "Maybe it was optimistic on their part, but it's not fair for customers to think that's really a reality."

Customers should contact their Allied loan officer for more information or to get their files transferred to another mortgage firm, Norton said. Those with concerns can also call the state financial regulation office at 410-230-6100.

jhopkins@baltsun.com

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