HUD Office of Inspector General - Single Family Housing Audit Semiannual Results

Mortgagees, Loan Correspondents, and Direct Endorsement Lenders

Austin, TX

HUD OIG audited Premier Mortgage Funding, Inc., a nonsupervised loan correspondent, because its default rate was 378 percent of the average of all lenders in the San Antonio, TX, HUD jurisdiction. Premier’s Austin, TX, branch originated 36 of 41 loans that defaulted within the first year of origination. Premier and its sponsor, JPMorgan Chase Bank NA, did not meet HUD underwriting or quality control requirements. HUD insured 11 loans totaling more than $1 million that the sponsor approved with inaccurate credit information. Further, Premier and its sponsors charged borrowers $163 in ineligible closing costs and approved 31 loans with appraisals that did not meet HUD requirements. These deficiencies increased the FHA insurance fund’s risk of loss. As of April 28, 2006, HUD had lost more than $394,000 on these loans.

OIG recommended that HUD (1) require JPMorgan Chase to reimburse HUD more than $394,000 for losses incurred on six loans, indemnify HUD for six loans totaling more than $647,000, and buy down loans or repay HUD for other deficiencies; (2) require Premier and JPMorgan Chase to take action to correct quality control deficiencies and ensure that appraisals meet HUD requirements; and (3) take appropriate administrative sanctions against Premier and JPMorgan Chase for entering incorrect data into the automated underwriting system and certifying their integrity. (Audit Report: 2006-FW-1011)

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