In an announcement Monday, the Federal Housing Administration (FHA) said it is immediately suspending Equitable Trust Mortgage Corporation (ETM) of Baltimore, Maryland for overcharging borrowers.
As a result, ETM is prohibited from originating and underwriting new FHA-insured mortgages.

According to the FHA, ETM improperly overcharged 37 borrowers for broker and loan origination fees in excess of what is currently allowed by HUD. It was also discovered that 68 percent of borrowers who were charged these unauthorized fees were minorities. The HUD Mortgage Review Board (MRB) found that on 21 of the borrowers’ Good Faith Estimates, ETM failed to property disclose all loan origination fees and lender fees to mortgage brokers. In addition, the company’s loans have a default rate significantly higher than the national average.

“It is critical that FHA lenders apply our standards and do not overcharge borrowers,” said David Stevens, FHA commissioner. “The fact that a disproportionate number of these borrowers were minority families is also troubling. I am fully committed to protecting consumers and the fiscal health of the FHA.”

The FHA said the company improperly charged consumers duplicative and unreasonable fees to originate their loans. The total loan origination charges a borrower is required to pay is limited by the FHA to one percent of the mortgage amount, but ETM charged borrowers both a broker fee and an additional one percent origination fee. These combined fees, which totaled more than one percent of the loan amount, supplied excessive compensation to ETM.
ETM’s lending practices are also being investigated by HUD’s office of inspector general. The company’s actions propose an inherent risk to FHA’s insurance fund and American taxpayers, and due to the seriousness of these violations, the company was suspended for a minimum of six months.By submitting a written request for a hearing before an Administrative Law Judge within 30 days, ETM may appeal its immediate suspension, but such a request will not delay FHA’s actions.