oversight

Pierce Commercial Bank, Tacoma, WA, Did Not Properly Underwrite a Selection of FHA Loans

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Telephone: (206) 220-5360      http://www.hud.gov/offices/oig/                          Fax: (206) 220-5162



                                                    U.S. Department of Housing and Urban Development
                                                    Office of Inspector General
                                                    Region X Office of Audit
                                                    909 First Avenue Suite 126
                                                    Seattle, WA 98104-1000




                                                                             MEMORANDUM NO:
                                                                             2011-SE-1801

September 30, 2011

MEMORANDUM FOR:              Craig T. Clemmensen, Director, Departmental Enforcement
                             Center, CACB


                             //signed//
FROM:                        Ronald J. Hosking, Regional Inspector General for Audit, 0AGA

SUBJECT:                     Pierce Commercial Bank, Tacoma, WA, Did Not Properly
                             Underwrite a Selection of FHA Loans


                                       INTRODUCTION

We reviewed 46 Federal Housing Administration (FHA) loans that Pierce Commercial Bank
underwrote as an FHA direct endorsement lender. Pierce was a supervised FHA direct
endorsement lender located in Tacoma, WA. This case was referred to us by the Office of
Inspector General’s (OIG) Office of Investigation. Our review objective was to determine
whether Pierce underwrote 46 loans in accordance with FHA requirements.

For each recommendation without a management decision, please respond and provide status
reports in accordance with U.S. Department of Housing and Urban Development (HUD) Handbook
2000.06, REV -3. Please furnish us copies of any correspondence or directives issued because of
the review.

We did not provide a discussion draft memorandum report to Pierce due to ongoing investigations
and the bank’s subsequent closure.

                               METHODOLOGY AND SCOPE

Our review of Pierce was limited to reviewing official FHA loan files submitted by Pierce to
support FHA’s insurance endorsement. Since this case was referred to us by the Office of
Inspector General’s (OIG) Office of Investigation, we were not able to interview Pierce
management and staff due to ongoing investigations. Our review of this documentation was limited
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to our stated objective and should not be considered a detailed analysis of the lender’s internal
controls or operations.

Pierce originated 1,912 FHA-insured loans between 2006 and 2009, primarily in Washington
State, totaling more than $475.8 million. Of the 145 files obtained, we selected 46 loans with an
original mortgage value of more than $11.9 million that included 44 finalized and an additional 2
in-process claims. All 25 loans cited in our examples, originally valued at more than $6.6
million, have been foreclosed upon and are in claim status. The loans obtained and reviewed
included both purchase and refinance transactions. Our selection of loans was not intended to be
representative, and additional loans fit our selection criteria. We limited our review to those files
released by OIG’s Office of Investigation and the FBI.

The Office of Investigation interviewed borrowers, many of whom confirmed that some
documents included in their loan files were not accurate or authentic. At the request of the
Criminal Division Assistant U.S. Attorney, we did not contact borrowers associated with the
potential criminal case.

                                             BACKGROUND

HUD’s One- to Four-Family Mortgage Insurance program encourages lending to potential
homeowners by insuring qualifying mortgages against loss. To qualify for mortgage insurance,
borrowers must satisfy cash investment, mortgage payment, and credit requirements.

FHA uses form HUD-92900A as the primary document to assign mortgage insurance to a
mortgage transaction. The borrower signs form HUD-92900A as an addendum to the uniform
residential loan application. In addition, the underwriter completes the lender portion of the
document and signs it to attest to the accuracy of the information.

When a loan is manually underwritten, the underwriter certifies that the lender used due
diligence and reviewed all associated documents during the underwriting of the loan. When a
loan is electronically underwritten, the underwriter certifies to the integrity of the data entered by
the lender, which is used by FHA systems to determine the quality of the loan.

Under both underwriting options, the lender certifies that a direct endorsement underwriter
reviewed the appraisal (if applicable) and further certifies that this mortgage is eligible for HUD
mortgage insurance. In all cases, the lender’s representative at the time of closing the mortgage
is required to certify that he or she has personally reviewed the mortgage loan documents,
closing statements, application for insurance endorsement, and all accompanying documents. He
or she also makes all certifications required for the mortgage as set forth in HUD Handbook
4000.4.

Pierce Commercial Bank, Tacoma, WA, was closed November 5, 2010, by the Washington
Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation
(FDIC) as receiver. To protect the depositors, FDIC entered into a purchase and assumption
agreement with Heritage Bank, Olympia, WA, to assume all of Pierce’s deposits.



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As of September 30, 2010, Pierce had approximately $221.1 million in total assets and $193.5
million in total deposits. Heritage Bank will pay FDIC a premium of 1 percent to assume all of
Pierce’s deposits. In addition to assuming all of the deposits of the failed bank, Heritage Bank
agreed to purchase essentially all of the assets. FDIC estimates that the cost to the Deposit
Insurance Fund will be $21.3 million. Compared to other alternatives, Heritage Bank’s acquisition
was the least costly resolution for FDIC’s Deposit Insurance Fund. Interested parties also can visit
FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/piercecommercial.html.

On August 5, 2011, the U.S. Attorney for the Western District of Washington indicted former
Pierce Commercial Bank employees, including the Vice President, Underwriter 1, the loan officer,
and others related to an investigation of the bank’s FHA loan operations.

Our objective was to determine whether Pierce loan files complied with FHA lending requirements.
We performed our work from April 2010 through May 2011. We did not conduct our work in
accordance with generally accepted government auditing standards because of the ongoing
investigation. To meet our objective, it was not necessary to fully comply with the standards, nor
did our approach negatively affect our review results.

                                      RESULTS OF REVIEW

Pierce did not properly underwrite at least 25 of the 46 loans reviewed because its underwriters
did not follow FHA’s requirements in HUD Handbook 4155.1, REV-5. For these 25 loans, the
FHA insurance fund suffered an estimated net loss of more than $3.5 million after reducing the
proceeds from property sales from actual claims paid of more than $6.7 million. Only 1 of our
25 example claims had not been finalized.

The Vice President, Underwriter 1, the loan officer, and others together originated these 25
loans. This loan officer was the Pierce loan officer on 17 of the loans, and Underwriter 1 was the
underwriter on 22 of the loans. The Vice President signed all 23 of the notes obtained. We
documented a number of deficiencies in the credit approval decisions and loan documentation,
demonstrating that the underwriter did not exercise due care in meeting the basic underwriting
guidelines.

Pierce’s direct endorsement underwriters incorrectly certified that due diligence was used in
underwriting the 25 loans since it did not underwrite them in accordance with HUD and FHA
regulations. Pierce underwrote each loan, and a Pierce underwriter certified to each application’s
accuracy. We found at least 1 material underwriting deficiency in each these 25 loans.

We summarized our review of the 25 loans by finding, below, and by case file and finding in
appendix A. Individual discussion of case files is available upon request.




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                             Types of findings                                 Observed
            Poor credit history                                                     10
            Unsupported income or questionable employment
           history                                                                 14
            Excessive debt-to-income ratio                                         17
            Excessive loan-to-value ratio                                           4
            Problem with funds to close                                             3
            Did not qualify as underwritten                                         5

The attached appendixes provide further detail related to our observations.

          Appendix A:        Schedule of Findings
          Appendix B:        Schedule of Participants
          Appendix C:        Underwriter 1 Observations
          Appendix D:        Loan Officer Observations
          Appendix E:        Other Individuals

Vice President, Pierce Residential Lending
The manager of Pierce’s residential lending operation, the Vice President, was responsible for
the lending operation and signed the mortgage notes at closing. During the audit period, the
lending operation was cited by FHA’s Quality Assurance Division in file No. 22458, dated May
28, 2009, for two findings regarding Pierce’s operation and nine findings that were case specific.

Pierce failed to adopt, implement, and maintain a quality control plan in compliance with HUD
Handbook 4060.1, REV-2, chapter 7. Notably, during the 2 years preceding the Quality
Assurance Division’s review, Pierce had 92 loans that went into default (60 days past due), but
Pierce failed to provide documentation showing that the loans were selected for quality control
review (refer to HUD Handbook 4060.1, REV-2, paragraph 7-6D). Our review of 25 more
examples of poor underwriting demonstrates that this lapse in quality control and management of
underwriting activities was substantial in scope.

Underwriter 1
As the lender’s representative at the time of closing, Underwriter 1 was required to certify that
she had personally reviewed the mortgage loan documents, closing statements, application for
insurance endorsement, and all accompanying documents. The certifications also referred to due
diligence and the integrity of the data used to qualify the loan. The deficiency examples offered
below, from 22 loans for which Underwriter 1 signed the lender’s certificate, contradict these
certifications.




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                             Types of findings                           Observed
            Poor credit history                                                9
            Unsupported income or questionable employment                     13
           history
            Excessive debt-to-income ratio                                   15
            Excessive loan-to-value ratio                                     4
            Problem with funds to close                                       2
            Did not qualify as underwritten                                   5


Loan Officer
The loan officer assisted potential borrowers in completing the initial and final loan application
describing the transaction and the borrower’s assets, income, and liabilities. The loan officer
signed page three of the application. The application provides instructions to the lender and
borrower and states that this information is the basis for qualifying the loan. His signature on the
application is an acknowledgement of these facts and instructions. The lender certifies on
HUD’s addendum to the uniform residential loan application.

Of the 17 examples of loan applications signed by the loan officer, 10 contained unsupported
income or questionable employment history. One loan’s downpayment source was disputed by
the borrower. Another loan’s description was misrepresented, including a falsified job according
to the borrower. Three loans involved financing more than one home as owner occupied without
disclosure to HUD, knowing that one would be rented.

We also noted that the loan application’s documentation of “other assets” instructed the
underwriter to itemize them. However, none of the applications contained a breakdown of
assets. On 13 of the 25 loans, the amount was exactly $45,000. Six loans showed no assets, and
one showed $75,000 in assets without itemization.

Other Individuals
We noted some examples of poor underwriting by other individuals. We did not review a
sufficient quantity of files by these individuals to recommend action against them at this time.
However, these examples may warrant attention if additional examples are identified by other audits
or investigations.

                                    AUDITEE COMMENTS

We did not provide a discussion draft memorandum report to Pierce due to ongoing
investigations and the bank’s subsequent closure. After initiation of our review, Pierce
performed its own review of files and self-reported a number of underwriting violations. Some
of our selected case files contained self-reported violations. The self-reported comments from
Pierce for each case file are included in our appendix of findings for Civil Referral 2011-KC-
0004-CA, previously provided to the Office of Program Enforcement. Additional electronic data
on Pierce’s self-report submission are available upon request.



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                                          RECOMMENDATIONS

We recommend that HUD’s Departmental Enforcement Center

         1A.         Initiate debarment action against the Pierce employees responsible for the
                     material underwriting deficiencies cited in this report and maintain diligent
                     coordination with OIG Offices of Audit and Investigation as well as applicable
                     staff of the U.S. Department of Justice and Office of the United States Attorney to
                     ensure that all related administrative, civil, and criminal cases proceed without
                     being compromised.




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Appendix A

                                       SCHEDULE OF FINDINGS
                                                    25 selected cases

                                              Pierce Commercial Bank
                                                    Tacoma, WA

                                  Unsupported                                              Problem
                                   income or           Excessive               Excessive      with         Did not
                         Poor     questionable          debt-to-                loan-to-    support      qualify for
    FHA                 credit    employment            income                    value    for funds    insurance as
  case No.              history      history             ratio                    ratio     to close    underwritten
561-8401576                X                                                                                 X
561-8636061                                                   X
561-8270108                            X                                                                          X
561-8395940                            X
561-8414419                            X                      X                   X
561-8442443                            X                      X
561-8464480                                                                                                       X
561-8468027                  X         X                      X
561-8481312                            X                      X                   X                               X
561-8483546                  X
561-8511210                  X                                X
561-8526194                            X                      X                   X
561-8274588                  X         X                      X                               X
561-8624743                            X                      X
561-8583553                  X                                X
561-8424265                            X                      X
561-8461869                                                   X                                                   X
561-8535404                  X                                X                               X
561-8496965                                                   X
561-8773564                                                   X
561-8488572                            X                      X
561-8610143                            X
561-8512114                  X         X
561-8322693                  X                                X                               X
562-2094647                  X        X                                           X
Observations:                10       14                      17                  4           3                   5




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Appendix B

                                                                      SCHEDULE OF PARTICIPANTS
                                                                                                              25 selected cases

                                                                                             Pierce Commercial Bank
                                                                                                   Tacoma, WA
                             Vice President

                                              Underwriter 1



                                                                             Underwriter 3

                                                                                              Underwriter 2




                                                                                                                                                                                                                    Underwriter 4
                                                              Loan Officer




                                                                                                                 Employee 1

                                                                                                                                  Employee 2

                                                                                                                                               Employee 3

                                                                                                                                                            Employee 4

                                                                                                                                                                         Employee 5

                                                                                                                                                                                      Employee 6

                                                                                                                                                                                                   Employee 7
FHA loan no.
561-8401576              X                    X               X
561-8636061                                                                                                                                                                           X                            X
561-8270108              X                    X               X
561-8395940              X                    X               X
561-8414419              X                    X               X
561-8442443              X                    X               X
561-8464480              X                    X               X
561-8468027              X                    X               X
561-8481312              X                    X               X
561-8483546              X                    X               X
561-8511210              X                    X               X
561-8526194              X                    X               X
561-8274588              X                    X               X
561-8624743              X                    X               X
561-8583553              X                    X               X
561-8424265                                   X               X
561-8461869              X                    X               X
561-8535404              X                                                   X                                                                                                                     X
561-8496965              X                    X                                              X
561-8773564              X                    X                                                                               X
561-8488572              X                    X               X                                                                                X
561-8610143              X                                                   X               X                                                                           X
561-8512114              X                    X                                                                 X
561-8322693              X                    X                                                                 X
562-2094647              X                    X                                                                                                      X
Observations:            23                   22              17                   2                2                2                1            1  1                      1            1            1                  1
X indicates which individuals were associated with the origination, underwriting, or closing of the loan.


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Appendix C

                                    SCHEDULE OF DEFICIENCIES:

                                                   Underwriter 1
                                                    22 selected cases

                                              Pierce Commercial Bank
                                                    Tacoma, WA




FHA loan no.                                   Underwriter 1 deficiencies:
                        The property did not qualify for insurance as underwritten since the
                        second home was not intended to be owner occupied. Two homes were
                        in financing. Underwriter 1 manually approved this loan despite a
561-8401576             history of bad credit including late housing payments.
                        The property did not qualify for insurance as underwritten since the
                        second home was not intended to be owner occupied. Two homes were
                        in financing. The verification said that employment had been terminated
561-8270108             and Underwriter 1 did not further document the borrower’s employment.
                        The continuance of overtime was not supported but was included in the
                        income figure used for automated approval. The verification said that
561-8395940             overtime would not continue.
                        The loan-to-value limit was exceeded due to recent late mortgage
                        payments; the late mortgage payments were rolled into the new
                        mortgage. Underwriter 1 manually approved excessive ratios without
                        compensating factors. The ratios exceeded the FHA guidelines and were
                        calculated using income that was overstated on the application. The net
                        monthly rental income from a vacation house, reported at $1,639.50, was
                        excessive and reported as false by the owner in an interview with OIG
561-8414419             investigators and the FBI.
                        Underwriter 1 manually approved excessive ratios without compensating
                        factors. The ratios were calculated using income that was improperly
                        inflated by the loan officer. If corrected, the already excessive ratios
561-8442443             would have increased.
                        The property did not qualify for insurance as underwritten. The owner
                        was planning to move and was also discussing the new home’s financing
                        with the loan officer. Since the refinanced property was not intended to
561-8464480             be owner occupied, it did not qualify for a cash-out refinance.
                        Underwriter 1 manually approved a loan with poor credit and unpaid
                        collections, which did not demonstrate the willingness to repay debt.
                        The ratios exceeded the FHA guidelines and were calculated using
                        income that was overstated on the application. Compensating factors
                        were inadequate. Income was not properly verified, and the borrower
                        stated in an interview with OIG investigators and the FBI that the
561-8468027             support was falsified.


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FHA loan no.                                   Underwriter 1 deficiencies:
                        Underwriter 1 electronically approved a misrepresented transaction by
                        recording a sale between siblings as a refinance. The loan-to-value limit
                        was exceeded because the house had not been owned for 12 months.
                        Income source and amounts were not authentic and were significantly
                        overstated on the application. The ratios were calculated using the
561-8481312             overstated income. If corrected, the ratios would have been excessive.
                        Underwriter 1 manually approved the loan although the borrower’s
                        credit did not indicate the ability or willingness to repay. Not all
                        outstanding consumer debt was current, and compensating factors were
561-8483546             inadequate.
                        Underwriter 1 manually approved the loan although the borrower’s
                        credit did not indicate the ability or willingness to repay and the debt-to-
                        income ratios were high. Not all outstanding consumer debt was current,
561-8511210             and compensating factors were inadequate.
                        The loan-to-value limit was exceeded due to recent late mortgage
                        payments that were rolled into the new mortgage. Underwriter 1
                        manually approved excessive ratios without compensating factors. The
                        ratios were calculated using income that was improperly calculated by
                        the loan officer. If corrected, the already excessive ratios would have
561-8526194             increased.
                        Underwriter 1 manually approved the loan although the borrower’s
                        credit did not indicate the ability or willingness to repay. Recent
                        consumer debt showed late payments, including a repossessed car. The
                        loan officer incorrectly calculated the debt-to-income ratios. If
                        corrected, the ratios would have exceeded the FHA guidelines, and there
                        were no compensating factors. The source of the downpayment was not
                        established, and the explanation was disputed by the borrower in an
561-8274588             interview with an OIG investigator and the FBI.
                        Underwriter 1 manually approved excessive ratios without compensating
                        factors. The loan officer calculated ratios using income that he
                        significantly overstated. Both the front- and back-end ratios would have
                        exceeded the benchmark guidelines and would have required
                        compensating factors if the correct income, supported in the case file,
561-8624743             had been used for the calculation.
                        Underwriter 1 manually approved debt-to-income ratios that far
                        exceeded FHA standards, without compensating factors. These
                        borrowers had many accounts in collection, indicating a lack of ability or
561-8583553             willingness to pay.
                        Electronic approval was obtained by Underwriter 1 based on overstated
                        income. Income was not properly verified and was not going to
                        continue. Ratios would have exceeded the FHA guidelines if
561-8424265             supportable income levels had been used for the calculation.




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FHA loan no.                         Underwriter 1 deficiencies:
              Electronic approval was obtained by Underwriter 1 based on inaccurate
              information and should not have been relied upon to approve the loan.
              The loan was classified as a “no-cash-out refinance” for automated
              underwriting but paid cash-out of more than $42,000. The ratios were
              calculated using a housing payment and monthly debt that was
561-8461869   understated.
              Underwriter 1 manually approved debt-to-income ratios that far
              exceeded FHA standards without compensating factors. Primary
              employment was terminated 2 weeks before closing and the stability of
561-8488572   the coborrower’s income was not determined.
              Underwriter 1 manually approved debt-to-income ratios that far
              exceeded FHA standards without compensating factors. Child support
              income was not stable and was the basis for a bankruptcy 2 years before
              the loan was approved. Income from the borrower’s parents was not
561-8496965   properly documented.
              Underwriter 1 manually approved debt-to-income ratios that far
              exceeded FHA standards without adding compensating factors after the
              automated underwriting system referred the loan for manual
561-8773564   underwriting due to an excessive housing payment-to-income ratio.
              Underwriter 1 manually approved the loan although the borrower’s
              credit did not indicate the ability or willingness to repay. Not all
              outstanding consumer debt was current, and compensating factors were
              inadequate. The explanation for bad credit provided no basis to expect
561-8512114   change. There was no evidence that child support would continue.
              Underwriter 1 manually approved the loan although the borrower’s
              credit did not indicate the ability or willingness to repay. Not all
              outstanding consumer debt was current. The front-end ratio was
              excessive, and compensating factors were inadequate. An inducement to
561-8322693   purchase did not reduce the mortgage amount.
              The loan-to-value limit was exceeded due to recent late mortgage
              payments that were rolled into the new mortgage. The borrower’s credit
              did not indicate the ability or willingness to repay. Income was not
562-2094647   properly verified for 2 years, just for 10 months.
Observations: 22 loans as underwriter




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Appendix D

                                     SCHEDULE OF DEFICIENCIES:

                                                     Loan Officer
                                                     17 selected cases

                                               Pierce Commercial Bank
                                                     Tacoma, WA




FHA loan no.                                    Loan Officer deficiencies:
                        This borrower had two homes in financing with the loan officer.
                        Therefore, the property did not qualify for insurance as underwritten
561-8401576             since this second home was not intended to be owner occupied.
                        This borrower had two homes in financing with the loan officer.
                        Therefore, the property did not qualify for insurance as underwritten
561-8270108             since this second home was not intended to be owner occupied.
                        The verification said that overtime would not continue. Therefore,
                        although the loan officer included it in the income figure on the
561-8395940             application, he could not support the continuance of overtime.
                        Income was overstated on the application. The net rental income from
                        a vacation house, reported at $1,639.50, was excessive and reported as
561-8414419             false by the owner in an interview with OIG investigators and the FBI.
                        The loan officer calculated the ratios using income that was improperly
                        inflated. If corrected, the already excessive ratios would have
561-8442443             increased.
                        The owner was moving and was discussing new home financing with
                        the loan officer. Therefore the property did not qualify for insurance as
                        underwritten since this second home was a cash-out refinance and was
                        not intended to be owner occupied. The information on the application
561-8464480             was misstated.
                        The loan officer’s documentation of income in the application was not
                        properly verified and was overstated. The borrower stated, in an
                        interview with OIG investigators and the FBI, that the support was
561-8468027             falsified.
                        The loan officer misrepresented a sale between siblings as a refinance.
                        Therefore, the loan-to-value limit was exceeded because the house had
                        not been owned for 12 months. The income source and amounts were
                        not authentic and were significantly overstated on the application. The
                        loan officer calculated the ratios using the overstated income. If
561-8481312             corrected, the ratios would have been excessive.
                        Although he was involved in this loan, the loan officer’s actions were
                        not directly linked to the exceptions cited in this example (see this loan
561-8483546             in appendix C).


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FHA loan no.                          Loan Officer deficiencies:
              Although he was involved in this loan, the loan officer’s actions were
              not directly linked to the exceptions cited in this example (see this loan
561-8511210   in appendix C).
              The loan officer calculated the ratios using income that was improperly
              calculated and Underwriter 1 manually approved the excessive ratios
              without compensating factors. If corrected, the already excessive ratios
561-8526194   would have increased.
              The loan officer calculated the debt-to-income ratios using income that
              was improperly calculated. If corrected, the ratios would have
              exceeded the FHA guidelines without compensating factors. The
              source of the downpayment was not established, and the explanation
              was disputed by the borrower in an interview with OIG investigators
561-8274588   and the FBI.
              The loan officer significantly overstated income. Income
              documentation was not properly verified, showed double counting, and
561-8624743   may not have been authentic.
              Although he was involved in this loan, the loan officer’s actions were
              not directly linked to the exceptions cited in this example (see this loan
561-8583553   in appendix C).
              The loan officer did not properly verify income, and the income was not
              expected to continue. Therefore, electronic approval was based on
              overstated income. Ratios would have exceeded the FHA guidelines if
561-8424265   supportable income levels had been used for the calculation.
              Although he was involved in this loan, the loan officer’s actions were
              not directly linked to the exceptions cited in this example (see this loan
561-8461869   in appendix C).
              Primary employment was terminated 2 weeks before closing and the
561-8488572   loan officer did not document the stability of the coborrower’s income.
Observations: 13 of 17 loans as loan officer




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Appendix E

                                SCHEDULE OF OTHER PARTICIPANTS
                                              Pierce Commercial Bank
                                                    Tacoma, WA

                                                              Deficiencies:
FHA loan no.
                        Underwriter 2
                        Underwriter 2 did not properly document the application for credit by a
                        self-employed borrower. Documentation required to properly evaluate
                        personal and business assets and liabilities was not available, including
561-8610143             income, deposits, and credit.
                        Underwriter 2 used child support income that was not stable and was the
                        basis for a bankruptcy 2 years before the loan was approved. Income
561-8496965             from parents was not properly documented.
                        Underwriter 3
                        Underwriter 3 manually approved debt-to-income ratios that far
                        exceeded FHA standards without compensating factors. The borrower’s
                        credit did not indicate the ability or willingness to repay, and bad credit
                        was not explained. Underwriter 3 did not verify the gift funds or explain
                        their origin. Prepaid commissions of $9,909 could have been the source
561-8535404             of the downpayment.
                        Underwriter 3’s underwriting did not meet standards for a self-employed
                        borrower and directly impacted the automated underwriting data entries
                        and decision. There was no corresponding self-employment underwriting
                        and credit analysis that should have been performed to consider corporate
                        income, assets, liabilities, and credit. Documentation required to properly
                        underwrite the file was not available, including income, deposits, and
561-8610143             credit.
                        Underwriter 4
                        Underwriter 4 manually approved excessive ratios without compensating
561-8636061             factors.




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