ATLANTA,None — Investigators want a fine imposed on a defunct Atlanta mortgage company accused of writing nearly $100 million worth of bad loans.
Mortgage Lender Accused Of $100M In Bad Loans
Because the federal government insured the loans, public money was used to pay them off.
The Department of Housing and Urban Development's Office of Inspector General began reviewing records last year as part of its Operation Watchdog. Atlanta's Pine State was one of 15 lenders targeted for investigation due to unusually high default rates. Investigators found that 70 percent of the loans they examined did not comply with federal underwriting guidelines.
READ: HUD Reviews Pine State
"It's a little bit scary, because it's not current," Pine State client Natasha Bouloute said of her mortgage.
Robert Motley Robert Motley, Pine State CEO She told Channel 2 consumer investigator Jim Strickland she is three to four months behind payments, which HUD considers "severely delinquent."
Channel 2 obtained records showing the company's default rate was 3.5 times the national average. The defaults are costly for the government.
"Claims were filed for $100 million within just a two-year period of time. That is a very large number," said Emory Law School housing finance professor Frank Alexander.
Strickland asked Alexander to examine an inspector general's report on Pine State's practices. The report showed investigators sampled 20 defaulted loans, of which 14 had violated federal standards, defaulting as a result.
"Half of the 20 loans it examined had gone into default in six or seven months," said Alexander. "That tells me that something was not done at the front end right."
The findings include inadequate proof of income, borrowers with too much debt in relation to their income and no proof clients were putting up enough of their own money for the down payment.
Alexander said the report's findings demonstrate "a complete and callous disregard for the federal underwriting requirements."
Bouloute's application showed most of her down payment was a gift from her builder, funneled through a nonprofit foundation. The sign at the front of her subdivision in Clayton County still advertises borrowers can get a loan with $1 down. Bouloute said half of her income goes to pay a loan she can't afford.
When Strickland asked her if she deserved the mortgage, Bouloute replied, "Looking in hindsight, probably not." Channel 2 consumer advisor Clark Howard called her loan application a "train wreck." He said a negative net worth and other red flags should have killed the deal.
"This deal was upside down before the paperwork was signed," said Howard.
The paperwork showed Pine State made gross revenues of more than $7,500 on Bouloute's loan.
Strickland confronted Pine State CEO Robert Motley as he entered his home after getting the morning paper. Strickland questioned him about Pine State's default rates, but Motley refused to turn around.
The inspector general is recommending the government to go after Pine State and its owners in civil court.
If HUD decides the case amounts to fraud, Motley's assets could be at risk. HUD is still investigating.