| The head of the Federal Housing Administration is warning FHA servicers to operate ethically, honestly and transparently or face the same fate as Taylor, Bean and Whitaker Mortgage Corp.
David H. Stevens made the comments at a speech in San Diego on Aug. 14, according to a transcript of his prepared remarks provided by the U.S. Department of Housing and Urban Development. Stevens was sworn in as FHA Commissioner and Assistant Secretary for Housing on July 15. Stevens said he wants FHA to dedicate management to lender-level reviews, loan-level reviews and portfolio-wide analysis. He said the recent actions against Taylor Bean justify the need for such resources. “The need for these kind of integrated controls was made clear by the action we took against Taylor, Bean and Whitaker last week in which FHA suspended TBW for failing to provide us with financial records — from not disclosing that it was a target of two separate investigations, to falsely certifying that it had not been sanctioned by any state,” he stated.
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photo of David Stevens
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Stevens acknowledged that HUD understood the impact its actions would have given that Taylor Bean was the third-largest FHA direct endorsement lender and the eighth largest issuer of Ginnie Mae mortgage-backed securities.
“We knew that there would be consequences felt throughout the industry,” the commissioner stated. “Following Taylor, Bean and Whitaker’s decision to close, we are working with the FDIC, Treasury and industry to ensure impacted borrowers can find another FHA-approved lender”
Stevens said HUD was sending a clear message to FHA lenders that don’t operate within HUD’s standards: “If you don’t act transparently and ethically — we won’t do business with you.” He explained that in addition to “vigorous enforcement,” the agency is tightening risk controls in product guidelines and counterparty requirements.
“To ward off the next Taylor, Bean and Whitaker, we need the tools to help us focus on lenders who may be engaged in imprudent lending practices and poorly-capitalized lenders who can’t support the risk they are underwriting,” Stevens added.
He noted FHA’s market share has gone from just 3 percent in 2006 to 23 percent today. Average FICO scores have risen to 693 from 633 two years ago.
More than 45 percent of this year’s fundings were for refinances.
