Taylor Bean dealt another blow

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Aug 05, 2009 (Ocala Star-Banner - McClatchy-Tribune Information Services via COMTEX) -- CNB | Quote | Chart | News | PowerRating -- Taylor, Bean & Whitaker Mortgage Corp. suffered another blow Tuesday when the Federal Housing Administration suspended the Ocala-based lending institution from making loans insured by the federal agency.

The FHA announcement came just one day after federal agents raided the mortgage company and offices of Colonial BancGroup Inc. in Orlando. A proposed financial deal between the two firms fell through on Friday.

The FHA said in a written statement that Taylor Bean (TBW) failed to submit its required annual financial report and failed to inform the FHA that TBW's independent auditors ended their examination of the company when they found "certain irregular transactions that raised concerns of fraud."

In addition to the loan suspension, the FHA is also recommending that two top TBW officials be temporarily banned from doing mortgage business with the federal government.

The FHA alleges that TBW President Ray Bowman and TBW CEO Paul Allen submitted false or misleading documents to the U.S. Department of Housing and Urban Development. The debarment would be for 18 months.

TBW has 30 days to appeal the decision.

"Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world -- operate within our standards or we won't do business with you," HUD Secretary Shaun Donovan said in the statement.

TBW was the 12th largest mortgage lender in the United States in the first half of this year, with $17 billion in loans, according to Inside Mortgage Finance, a trade publication.

Among FHA lenders, TBW ranked third largest in May.

TBW executives could not be reached for comment for this story. The Wall Street Journal reported on its Web site that Lee B. Farkas, chairman of TBW, said in response to questions that he was unaware of the FHA action.

What the FHA suspension means is that brokers and smaller mortgage banks that usually sell their loans to TBW will have to go elsewhere if they want those loans guaranteed by the FHA. And finding a private insurer to do that is increasingly difficult, as funding sources have become scarce.

The Government National Mortgage Association (Ginnie Mae) is also cutting off TBW as an issuer of its Mortgage-Backed Securities program and stopping TBW from servicing its securities, according to the FHA statement.

Ginnie Mae guarantees payments to holders of securities backed by FHA loans. That means Ginnie Mae will take back control of TBW's nearly $25 billion Ginnie Mae portfolio.

TBW was the eighth largest issuer of Ginnie Mae mortgage-backed securities.

FHA officials also said TBW failed to report as required that in June the mortgage company was forced by multiple state agencies to pay a $9 million settlement.

The deal was part of an agreement with the Florida Office of Financial Regulation and 13 other states after an investigation of the company's 2006 and 2007 non-traditional loans found problems with how the mortgage company did business.

"We were ... troubled that the company not only failed to disclose it was a target of a multi-state examination .... but then falsely certified that it had not been sanctioned by any state. FHA won't tolerate irresponsible lending practices," said FHA Commissioner David Stevens.

As for TBW customers whose loans served as collateral for Ginnie Mae securities through TBW, Ginnie Mae president Joseph Murin said those customers need not worry.

"Although this action will result in a new servicer, the transition will be seamless for them," he said.

The Office of the Special Inspector General for the Troubled Asset Relief Program (TARP) executed two search warrants Monday at Taylor Bean's offices in downtown Ocala. According to Farkas, the agents were looking for documents concerning Colonial, which is based in Montgomery, Ala.

Taylor Bean is what's known as a wholesale mortgage lender. Colonial has been the firm's primary funding bank. Taylor Bean tried to help Colonial earlier this year by offering to infuse $150 million into the bank to help it secure federal TARP funds.

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