Rare case between HUD and lender
Allied Home Mortgage Corporation was recently slapped with a mortgage fraud lawsuit filed by the U.S. Department of Housing and Urban Development (HUD) which immediately suspended Allied’s ability to originate Federal Housing Administration (FHA) insured mortgages which was the majority of their business.
Allied argued that they had not been found guilty of anything and HUD should not be able to shut them down without any legal findings, which a U.S. District Court judge in the Southern District of Texas in Houston agreed, ordering an injunction to HUD to allow Allied to resume FHA-backed loans.
Allegations against Allied
This injunction marks a major move in the mortgage world as Allied fights back against charges against them as well as direct allegations against their CEO Jim Hodge and EVP Jeanne Stell which seek damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). HUD alleges a decade of knowingly concealing misconduct in connection with their residential lending practices, namely originating loans from unapproved branch offices, violating FHA requirements.
The final outcome of HUD’s charges against Allied remains unseen, but in the meantime, Allied will be allowed to continue originating FHA-backed loans and their 723 employees will keep their jobs. It is unknown whether or not any misconduct occurred, but one thing is for sure – Allied is fighting back.