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Fines Worry FHA Lenders.(Brief Article)
Mortgage servicers are taking issue with the Department of Housing and Urban Development over its loss mitigation rating system and the possibility that servicers could face severe fines for low ratings.
The first results from the rating system are "very disturbing," said James Stokes, first vice president of Atlantic Mortgage & Investment Co., Jacksonville, Fla.
It appears that 75% of Federal Housing Administration servicers are ranked in the lowest performance categories (Tier 3 and Tier 4) and are "perceived by the industry to be at risk of treble damages," Mr. Stokes says in a comment letter to HUD, which he wrote on behalf of his company and ABN AMRO Mortgage Corp.
"ABN/AMIC feels strongly that an unacceptable (Tier 4) ranking should not subject the servicer automatically to treble damages when violations are found," Mr. Stokes said.
FHA officials are working on the tiered approach as a way to determine when the department should take strong enforcement actions, including fines of up to three times a claim.
FHA claims in 1999 averaged $83,020 - so triple or treble damages could amount to $249,061 per loss mitigation violation, according to the Mortgage Bankers Association.
Congress gave HUD the authority to charge treble damages in 1998, but so far the department has not exercised this power.
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Source: HighBeam Research, Fines Worry FHA Lenders.(Brief Article)