Subpoenas were served on the corporate offices of 15 mortgages companies Tuesday as part of an investigation of the backgrounds of claims filed against the Federal Housing Administration (FHA) mortgage insurance program.

The subpoenas demanded data and documents related to what the Office of the Inspector of General (OIG) and the U.S. Department of Housing and Urban Development (HUD) termed a high rate of defaults on insured loans and significant numbers of claims filed against the FHA mortgage fund as a result of those defaults.

In announcing the probe with FHA Commissioner David H. Stevens, Inspector General Kenneth Donohue said "The goal of this initiative is to determine why there is such a high rate of defaults and claims with these companies and whether there is wrongdoing involved. We aren't making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud. We are members of the President's Financial Fraud Enforcement Task Force and today's activities reflect our commitment to seeking information on red flags that may arise from data analysis."

The companies were among a number of direct endorsement companies HUD and OIG are scrutinizing because of a significant number of claims, a certain level of underwriting volume and a higher rate of defaults and claims than the natural average. That a high number of defaults occurred early in the life of the mortgage was described as a key indicator of problems in underwriting and origination. HUD and OIG, Donohue said, want to see why these loans failed.  

In the past, HUD and OIG have pursued suspected problems at the local branch offices of mortgage companies. Directing this probe at the corporate level is a new approach for the offices.

The probe initiated by the subpoenas will be conducted jointly by OIGs and HUD Audit and Investigation staffs which will attempt to determine the reasons behind the default rates. IG Donahue said that this is especially important because FHA is currently being called on to write such significant numbers of the nation's mortgages.

If any of the companies are found to be culpable, HUD can proceed with administrative sanctions including suspensions, limited denial of participation, debarment, and civil monetary penalties. In addition, it can call on the Department of Justice and state and local law enforcement to pursue civil and criminal penalties.

The 15 companies issued subpoenas are:

First Tennessee Bank N.A., Memphis, TN
Alethes LLC, Lakeway, TX
Security Atlantic Mortgage Co., Edison, NJ
Pine State Mortgage Corporation, Atlanta, GA
Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI
Alacrity Financial Services, LLC, Southlake, TX
Assurity Financial Services, LLC, Englewood, CO
D and R Mortgage Corporation, Farmington, MI
Webster Bank, Cheshire, CT
Mac-Clair Mortgage Corporation, Flint, MI
Americare Investment Group, Inc., Arlington, TX
1st Advantage Mortgage, Lombard, IL
American Sterling Bank, Independence, MO
Sterling National Mortgage Company Inc., Great Neck, NY
Dell Franklin Financial LLC, Columbia, MD