The Government National Mortgage Association, commonly known as Ginnie Mae, is transferring to one of its own servicers 6,700 loans – totaling $1.3 billion – that once belonged to the Long Island-based Lend America.
Lend America was the largest lender of mortgages backed by the Federal Housing Administration in the New York metro area before it was shutdown by federal authorities on Dec 1. The company was servicing about $1.8 billion in loans.
The FHA, citing abuses that included submitting false documents and making loans that did not meet requirements, imposed civil money penalties of $512,500 against Ideal Mortgage Bankers, which did business as Lend America.
But since the shutdown, Lend America refinance borrowers have complained that their old loans had not been paid off.
“We made the decision that it was in the best interest of the government and taxpayers to take that portfolio and place it with one of our own” servicers, Mary Kinney, Ginnie Mae executive vice president, told Newsday, Long Island’s daily newspaper.
Kinney said Ginnie Mae needs to make sure that investors in Lend America loans are getting paid, but there may be loans on paper that do not actually exist or borrowers that refuse to pay due to disputes with the lender.
Federal authorities also felt that private mortgage servicers interested in acquiring the Lend America loans could not handle the magnitude and issues of the troubled portfolio.
A Ginnie Mae guaranty allows mortgage lenders to obtain a better price for their mortgage loans in the secondary market. The lenders can then use the proceeds to make new mortgage loans available, Ginnie Mae states on its website. Ginnie Mae had given Lend America the authority to bundle and sell loans as investments last year.
Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS).
But Ginnie Mae guarantees investors the timely payment of principal and interest on MBS backed by federally-insured or guaranteed loans — mainly loans insured by the FHA.
