Mortgage – HousingWire

American Financial Network to pay $1M fee to resolve fraud allegations
PIMCO-backed FGMC lays off most staffers
HW+ Member Spotlight: Ben Bernstein

American Financial Network to pay $1M fee to resolve fraud allegations

Posted: 24 Jun 2022 01:41 PM PDT

Brea, California-based direct lender American Financial Network will pay about $1.04 million to resolve allegations that it fraudulently originated government-backed mortgage loans insured by the Federal Housing Administration (FHA).

The settlement agreement announced by the United States Attorney for the Eastern District of Washington on Tuesday puts an end to a joint investigation conducted by the U.S. Attorney’s Office for the Eastern District of Washington, U.S. Department of Housing and Urban Development (HUD), and the U.S. Department of Veterans Affairs after a former loan processor with AFN filed a lawsuit against the California lender in March 2019.

The whistleblower claimed AFN knowingly underwrote certain FHA mortgages and approved for some mortgage insurance that didn’t meet FHA requirements or qualify for insurance between December 2011 and March 2019. AFN knowingly failed to perform quality control reviews that it was required to conduct, the former AFN loan processor alleged. AFN did not respond to requests for comment.

"Quality and affordable housing is a critical issue in Eastern Washington and across the nation," U.S. Attorney Vanessa Waldref said in a statement. "By improperly originating ineligible mortgages, lenders take advantage of the limited resources of the FHA program and unfairly pass the risk of loss onto the public.”

AFN, a participant of FHA's Direct Endorsement Program since at least 2011, is responsible for carefully underwriting the mortgage to make sure it meets all FHA requirements, according to the U.S. Attorney's office. Once a mortgage loan is insured by the FHA, the lender that holds the mortgage note can submit a claim for insurance benefits to FHA to cover its losses if the borrower defaults or is unable to repay the mortgage.

When a whistleblower, or "relator" files a lawsuit, the U.S. investigates the allegations under the False Claims Act and chooses whether to intervene and take over the action or to decline to intervene and allow the relator to proceed with the allegation on behalf of the U.S.

"Investigations such as these help safeguard the integrity of the home loan approval process and protect vulnerable veterans from fraudulent lending practices," Jason Root, special agent in charge of the Department of Veterans Affairs office of inspector general's northwest field office said in a statement.

AFN did not admit to any wrongdoing. Per the settlement agreement, the former loan processor at AFN will receive more $228,172 of the settlement proceeds and will recover attorney fees, expenses, and costs.

The post American Financial Network to pay $1M fee to resolve fraud allegations appeared first on HousingWire.

PIMCO-backed FGMC lays off most staffers

Posted: 24 Jun 2022 01:08 PM PDT

Mortgage lender First Guaranty Mortgage Corporation cut about 80% of its workforce on Friday and has stopped accepting new mortgage applications, HousingWire has learned. Former employees said the lender has “essentially shuttered.”

According to two former FGMC employees, the company on Friday laid off around 500 employees without severance payment, meaning only 100 staffers remain.

"They are not accepting new loan applications, so that probably means they are getting ready to close up the whole thing," an employee who was affected by the layoff told HousingWire.

The investment management firm PIMCO bought a sizable stake in the mortgage lender in 2015 and initiated layoffs and management changes in 2018, another tough year for the mortgage industry.

The same former employee said PIMCO was trying to strike a deal to bring more funding to FGMC, which "went south" and then FGMC "got hit with margin calls."

"PIMCO was attempting to sell part of FGMC but when that fell through, they completely divested," said another source. "About nearly 500 people were affected today including sales and ops in all three channels. Essentially the company is shuttered."

"Apparently their stockpile of ‘cash’ was a lie. Time to start the job search!," one former employee posted on LinkedIn.

In a written statement, a spokesperson for the lender said FGMC “made the difficult but necessary decision to institute a reduction in force as the mortgage market faces significant, unexpected, and unprecedented economic pressures.”

FGMC declined to comment further, and PIMCO did not immediately return requests for comment.

Licensed in 49 states and the District of Columbia, FGMC offers mortgage loans for new home purchases and refinancings. The company offers a variety of loan products, including FHA, USDA, VA and non-QM loans. Just last week FGMC launched a new second-lien program, where borrowers could tap their equity without disrupting their rate.

The mortgage lender does business as Goodmortgage in retail branches, where they work directly with consumers. It also works closely with third-party origination partners through the correspondent and wholesale channels, where the company offered its proprietary line of Non-QM products called Maverick Solutions.

The post PIMCO-backed FGMC lays off most staffers appeared first on HousingWire.

HW+ Member Spotlight: Ben Bernstein

Posted: 24 Jun 2022 08:11 AM PDT

This week's HW+ member spotlight features Ben Bernstein, director at Axonic Capital, an investment firm with a deep focus on the structured credit sector of the financial markets. Prior to that, Bernstein held leadership roles in Odeon Capital Group and JPMorgan Chase.

Below, Bernstein answers questions about the housing industry:

HousingWire: What is your current favorite HW+ article and why?

Ben Bernstein: Logan and Sarah's Monday podcast is my go to. Logan cuts through all the noise and delivers clear concise opinions rooted in the data. So not only do I get updates on what is going on in the housing market but I learn which data points are relevant and how to analyze them. And Sarah always asks insightful questions. On top of that, it is super entertaining!

HousingWire: What has been your biggest learning opportunity?

Ben Bernstein: My biggest learning opportunity (and weirdest job I ever had) was every job I ever had. I started my career at Bear Stearns on February 23 2008. To say that was an interesting time and place to start a career would be an understatement. Two weeks later I was working for JPMorgan and eventually made it to a desk whose focus was working out of the assets that brought Bear down in the first place.

Think funky bonds linked to housing like subprime RMBS and CDOs. Getting to dig deep into what these bonds were and how the underlying mortgages impacted them was priceless. I started at Axonic, a credit fund focused on investments linked to residential and commercial real estate, in November of 2019.

Another interesting time to join an investment firm! Three months later, I was working remotely and figuring out how to be productive from home. Fourteen years into my career and my biggest learning opportunity is right now.

I'm learning new stuff every single day whether it be about the bond market, housing, trading, macro economics, etc. All I need to do is turn around and ask a question out loud and I'll learn something new.

HousingWire: What is the best piece of advice you've ever received?

Ben Bernstein: The best piece of advice I've ever received was what is important is what you do when no one is looking. Your reputation, work ethic, success, productivity and integrity are all linked to what you do because you know you need to do it as opposed to what you think other people want you to do.

HousingWire: What's 2-3 trends that you're closely following?

Ben Bernstein: I don't think anyone will be surprised by the trends I'm following these days: Inflation, credit spreads, housing prices and how they are all intertwined. Fortunately I have smart people around me (including HousingWire) to give me their opinions on where we are headed. It's my job to put it all together. The past two years have been some of the most interesting times in markets and from where I sit I don't think that will change any time soon.

HousingWire: What keeps you up at night and why?

Ben Bernstein: What keeps me up at night is the state of the housing market. 35+% home price appreciation since COVID-19 began. Two months supply of housing. Mortgage rates going up faster than they ever have. There's a lot going on!

One thing as bond traders that we do is we look down before we look up. In other words we look at risk before we look at upside. An overheated housing market is something we pay close attention to because we don't want prices to go down precipitously but we don’t want inflation to run away either. So it's really an interesting time to be tracking the housing market and all of the ancillary markets that are impacted by it.

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The post HW+ Member Spotlight: Ben Bernstein appeared first on HousingWire.

Loans And Mortgage

Sunday, June 26, 2022