Great Oak Lending Partners, a Timonium broker, is being fined $11,000 for what U.S. officials describe as misleading advertising about Federal Housing Administration mortgages.
The Department of Housing and Urban Development, which oversees FHA, said this week that its mortgagee review board found several problems with Great Oak Lending's direct-mail ads. In addition to the fine, the company will have to forward its advertising to the FHA for monthly reviews during a six-month probation, HUD said. Great Oak Lending Partners can appeal the decision.
HUD characterized the sanctions against Great Oak and others as a sign it will more aggressively pursue lenders who aren't following the rules. Use of mortgages insured by FHA ballooned after the subprime-lending industry collapsed, and money the agency set aside to deal with the expense of foreclosures is dwindling. When HUD announced changes in borrower requirements last week to shore up the program, it also promised to increase enforcement.
According to HUD, the Baltimore County company suggested that the FHA's reverse mortgage was similar to a government benefits program such as Social Security, rather than a government insurance program that allows seniors to use the equity they built up in their homes. The federal agency also said the company used a facsimile of HUD's seal and a Washington post office box in ads to imply that it had been endorsed by the federal government, rather than simply authorized to lend FHA products.
Joshua Shein, Great Oak Lending's managing partner, said in an e-mail that the direct-mail ads were the result of one employee contracting with an outside marketing company "without any knowledge or approval from owners and managers of Great Oak Lending Partners." The marketing company wrote, designed and mailed the ads, fewer than 1,000 in total, he said.
"There was absolutely no intention to violate any rule," Shein said in the e-mail, adding: "As soon as management learned of this violation, we immediately initiated a proactive approach to stop all current mailings and to ensure it never happens again."
The HUD action was one of several announced this week. The mortgagee review board put another company on probation for misleading advertising practices, fining the Rhode Island firm $7,000. It also permanently withdrew FHA lending approval from three out-of-state companies and suspended approval for a fourth.
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