oversight

CTX Mortgage Company LLC, Dallas TX, Allowed the Recording of Prohibited Restrictive Covenants

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-04-18.

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

                                                 U.S. DEPARTMENT OF
                                HOUSING AND URBAN DEVELOPMENT
                                         OFFICE OF INSPECTOR GENERAL




                                                    April 18, 2013
                                                                                                   MEMORANDUM NO:
                                                                                                        2013-LA-1803


Memorandum
TO:                Charles S. Coulter
                   Deputy Assistant Secretary for Single Family Housing, HU

                   Dane M. Narode
                   Associate General Counsel for Program Enforcement, CACC



FROM:              Tanya E. Schulze
                   Regional Inspector General for Audit, Los Angeles Region, 9DGA

SUBJECT:           CTX Mortgage Company LLC, Dallas TX, Allowed the Recording of Prohibited
                   Restrictive Covenants


                                                INTRODUCTION

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), conducted a limited review of loans underwritten by CTX Mortgage Company LLC. 1
We selected the lender based on the results of an auditability survey, which determined that CTX
Mortgage allowed prohibited restrictive covenants to be filed against Federal Housing
Administration (FHA)-insured properties. The objective of our review was to determine the
extent to which CTX Mortgage failed to prevent the recording of prohibited restrictive covenants
with potential liens in connection with FHA-insured loans closed between January 1, 2008, and
December 31, 2011.

HUD Handbook 2000.06, REV-4, provides specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the review.




1
    FHA identification number 51358

                                                    Office of Audit (Region 9)
                                  611 West Sixth Street, Suite 1160, Los Angeles, CA 90017
                                           Phone (213) 894-8016, Fax (213) 894-8115
                               Visit the Office of Inspector General Web site at www.hudoig.gov.
The Inspector General Act, Title 5 United States Code, section 8L, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

                                   METHODOLOGY AND SCOPE

We reviewed 842 2 loans underwritten by CTX Mortgage with closing dates between January 1,
2008, and December 31, 2011. We conducted the audit work from the HUD OIG Phoenix, AZ,
Office of Audit between June 2012 and January 2013. To accomplish our objective, we

•       Reviewed prior HUD OIG audit reports with findings that included lenders allowing
        prohibited restrictive covenants; 3

•       Reviewed relevant FHA requirements set forth in 24 CFR (Code of Federal Regulations)
        Part 203 and HUD Handbooks 4000.2 and 4155.2;

•       Reviewed a HUD OIG legal opinion pertaining to restrictive covenants;

•       Reviewed a HUD management decision discussing prohibited restrictive covenants;

•       Reviewed prior reviews conducted by the HUD Quality Assurance Division;

•       Discussed the prohibited restrictive covenants with CTX Mortgage officials; and

•       Obtained and reviewed FHA loan data downloaded from HUD’s Single Family Data
        Warehouse 4 and Neighborhood Watch systems. 5

We analyzed the Single Family Data Warehouse data as of May 31, 2012, and separated the data
into two categories: (1) loans that had gone into claim status and (2) loans that were still active.
We selected a 100 percent review of the claim loans, 770 loans total, and elected to review a
highly stratified attribute statistical sample of the 10,481 active loans. The stratified sample of
the 72 loan samples was randomly selected and weighted by means of a computer program in
SAS® using a seed value of 7. To meet the audit objective, we also

•       Requested and received copies of the lender’s FHA lender files for the loans selected for
        review;

•       Interviewed some borrowers for loans on which HUD paid a claim;


2
  770 claim loans and 72 statistically selected active loans
3
  Audit report numbers 2009-LA-1018, 2010-LA-1009, and 2011-LA-1017
4
  HUD’s Single Family Data Warehouse is a collection of database tables structured to provide HUD users easy and
efficient access to single-family housing case-level data on properties and associated loans, insurance, claims,
defaults, and demographics.
5
  Neighborhood Watch is a Web-based software application that displays loan performance data for lenders and
appraisers by loan types and geographic areas, using FHA-insured single-family loan information.




                                                       2
•       Conducted Internet research, identified and queried applicable county recorder offices,
        and searched Accurint 6 to obtain and review recorded documents related to the sampled
        FHA-insured mortgages; and

•       Compiled and summarized the loan data with corresponding prohibited restrictive
        covenants.

For the audit sample, the percentage and number of loans with unallowable restrictive covenants
were computed based on the weighted sampling results and extended to the population using the
“surveyfreq” procedure provided by SAS®. We used a 16-strata sample design to control for
potential bias that might arise from varying rates of price escalation and varying resale demand
based on population density. Of the selected samples, eight had disallowed covenants, which
projects to 11.42 percent, or 1,196 loans. To account for the statistical margin of error, we
subtracted the standard error (3.65) times a t-score of 1.67. As a result, we can be 95 percent
confident that at least 555 of the 10,481 loans had similar problems with unallowable restrictive
covenants.

We relied in part on and used HUD computer-processed data to select the claim and active loans
reviewed for prohibited restrictive covenants. Although we did not perform a detailed
assessment of the reliability of data, we performed a minimal level of testing and determined that
the data were sufficiently reliable for our purposes.

We conducted our work in accordance with generally accepted government auditing standards,
except that we did not consider the internal controls or information systems controls of CTX
Mortgage. We did not follow standards in these areas because our objective was to identify the
extent to which CTX Mortgage allowed prohibited restrictive covenants and how that affected
the FHA single-family insurance program risk. To meet our objective, it was not necessary to
fully comply with the standards, nor did our approach negatively affect our review results.

                                               BACKGROUND

CTX Mortgage was a nonsupervised direct endorsement lender 7 headquartered in Dallas, TX. It
was approved to participate in HUD’s FHA mortgage insurance program in 1984 and voluntarily
withdrew its FHA approval status in July 2010. CTX Mortgage, which was acquired by
PulteGroup with the Centex merger, had transitioned all of CTX Mortgage’s loan origination
production to Pulte Mortgage as of December 31, 2009. Its affiliate builder, Centex Homes, was
the seller of the properties discussed in this review memorandum.

FHA, created by Congress in 1934, is the largest mortgage insurer in the world aimed at helping
low- and moderate-income families become homeowners by lowering some of the costs of their

6
  Accurint LE Plus accesses databases built from public records, commercial data sets, and data provided by various
government agencies.
7
  A nonsupervised lender is a HUD-FHA-approved lending institution that has as its principal activity the lending or
investment of funds in real estate mortgages and is not a supervised lender, a loan correspondent, a governmental
institution, a government-sponsored enterprise, or a public or State housing agency and has not applied for approval
for the limited purpose of being an investment lender.




                                                         3
mortgage loans. It is also the only government agency that operates entirely from its self-
generated income from mortgage insurance paid by homeowners and costs the taxpayers
nothing. FHA mortgage insurance encourages lenders to approve mortgages for otherwise
creditworthy borrowers that might not be able to meet conventional underwriting requirements
by protecting the lender against default. However, according to HUD-FHA requirements, the
lender has the responsibility at loan closing to ensure that any conditions of title to the property
are acceptable to FHA and that the mortgaged property will be free and clear of all liens other
than the mortgage. Lenders are responsible for complying with all applicable HUD regulations
and in turn are protected against default by FHA’s Mutual Mortgage Insurance Fund, which is
sustained by borrower premiums.

In the event of homeowner default, the FHA fund pays claims to participating lenders. To this
end, lenders have a responsibility to ensure that the FHA fund is protected by approving only
those loans that meet all eligibility requirements. The FHA fund capital reserve ratio has a
congressional mandate of 2 percent. However, based on the 2012 annual report to Congress on
the FHA fund, 8 its capital reserve ratio had fallen below zero to a negative 1.44 percent. A U.S.
Government Accountability Office report on the FHA fund stated, “If the [capital] reserve
account were to be depleted, FHA would need to draw on permanent and indefinite budget
authority to cover additional increases in estimated credit subsidy costs.” 9 Therefore, the FHA
fund would no longer run on only self-generated income.

We reviewed a legal opinion 10 from OIG’s Office of Legal Counsel regarding the seller’s
restriction on conveyance of FHA properties. Counsel opined that the recorded agreements
between the seller and borrowers would constitute a violation of HUD statutes, regulations, or
handbook requirements. In its opinion, the Office of Legal Counsel specifically stated that 24
CFR 203.41(b), pertaining to consent by a third party, appears to violate HUD’s regulations. In
this case, the seller is considered a third party.

Additionally, we obtained a HUD management decision on the recommendations of a prior OIG
audit 11 not related to CTX Mortgage. In the decision, HUD agreed that the execution of
prohibited restrictive covenants is a violation of Federal regulations and FHA requirements and
considered the violation a serious deficiency, stating that loans with prohibited restrictive
covenants are ineligible for FHA insurance.

                                          RESULTS OF REVIEW

CTX Mortgage did not follow HUD requirements regarding free assumability and liens when it
underwrote loans that had executed and recorded agreements between sellers and the FHA
borrower, containing prohibited restrictive covenants and potential liens in connection with
FHA-insured properties. This noncompliance occurred because CTX Mortgage did not exercise

8
  Annual Report to Congress, Fiscal Year 2012 Financial Status, FHA Mutual Mortgage Insurance Fund
9
  U.S. Government Accountability Office testimony, GAO-12-578T, Mortgage Financing, FHA and Ginnie Mae
Face Risk-Management Challenges, issued March 29, 2012
10
   The legal opinion was previously obtained during the review of a separate lender (2011-LA-1017) for a similar
restriction contained in the FHA purchase agreement.
11
   Audit report 2011-LA-1017




                                                         4
due diligence and was unaware that the restrictive covenants recorded between the sellers and the
borrowers violated HUD-FHA requirements. As a result, we found 683 FHA-insured loans (128
claim loans and 555 active loans) with a corresponding prohibited restrictive covenant with a
potential lien recorded with the applicable county recording office, and CTX Mortgage placed
the FHA fund at unnecessary risk for potential losses.

Claim Loan Review Results

We identified and reviewed all 770 claim loans underwritten by CTX Mortgage, 12 limited to
loans closed between January 1, 2008, and December 31, 2011. In our review of the applicable
county recorders’ documents, we identified unallowable restrictive covenants corresponding to
128 of the 770 claim loans with properties in Arizona, Florida, Georgia, South Carolina, and
Utah. Of the 128 loans, 51 resulted in actual losses 13 to HUD totaling more than $5.2 million
(see appendix C, table 1), and 77 resulted in claims paid totaling more than $7.9 million, but the
properties had not been sold by HUD (see appendix C, table 2).

Active Loan Sample Results

Additionally, we completed a random attribute statistical sample and selected 72 of 10,481 active
loans within our audit period. In our review of the applicable county recorders’ documents of
the sampled active FHA loans, we identified an unallowable restrictive covenant corresponding
to 8 of the 72 sampled active loans with properties in Arizona, Florida, and South Carolina. The
eight loans were active with an unpaid principal balance of more than $1.5 million (see appendix
C, table 3).

Based on a highly stratified sample, designed to minimize error and accommodate varying rates
of price escalation and varying demand based on population density, 11.42 percent of the 72
weighted loan samples contained restrictive covenants, which are not allowed by HUD
rules. Therefore, we can be 95 percent confident that at least 555 of the 10,481 active loans in
our audit period had similar problems with unallowable restrictive covenants (see Methodology
and Scope).

Restriction on Conveyance

For each FHA loan, the lender certifies on the Direct Endorsement Approval for HUD/FHA-
Insured Mortgage (form HUD-92900-A) that the mortgage was eligible for HUD mortgage
insurance under the direct endorsement program (see lender certification excerpts below).




12
  Based on HUD’s Single Family Data Warehouse as of May 31, 2012
13
  The actual loss is the calculated amount of loss resulting from the sale of a HUD property. The loss is calculated
based on the sales price - [acquisition cost + capital income/expense (rent, repair costs, taxes, sales expenses, and
other expenses)].




                                                          5
The FHA insurance requirements, set forth in 24 CFR 203.41(b), state that to be eligible for
insurance, the property must not be subject to legal restrictions on conveyance. Further, 24 CFR
203.41(a)(3) defines legal restrictions on conveyance as “any provision in any legal instrument,
law or regulation applicable to the mortgagor or the mortgaged property, including but not
limited to a lease, deed, sales contract, declaration of covenants, declaration of condominium,
option, right of first refusal, will, or trust agreement, that attempts to cause a conveyance
(including a lease) made by the mortgagor to:

(i)        Be void or voidable by a third party;
(ii)       Be the basis of contractual liability of the mortgagor for breach of an agreement not to
           convey, including rights of first refusal, pre-emptive rights or options related to
           mortgagor efforts to convey;
(iii)      Terminate or subject to termination all or a part of the interest held by the mortgagor in
           the mortgaged property if a conveyance is attempted;
(iv)       Be subject to the consent of a third party;
(v)        Be subject to limits on the amount of sales proceeds retainable by the seller; or
(vi)       Be grounds for acceleration of the insured mortgage or increase in the interest rate.”

Additionally, 24 CFR 203.32 states that a “mortgagor must establish that, after the mortgage
offered for insurance has been recorded, the mortgaged property will be free and clear of all liens
other than such mortgage, and that there will not be outstanding any other unpaid obligations
contracted in connection with the mortgage transaction or the purchase of the mortgaged
property, except obligations that are secured by property or collateral owned by the mortgagor
independently of the mortgaged property.” 14

Finally and of most significance, HUD Handbooks 4000.2, paragraph 5-1(B), and 4155.2,
paragraph 6.A.1.h, both state that it is the lender’s responsibility at loan closing to ensure that
any conditions of title to the property are acceptable to FHA. In essence, it is the duty of the
lender to ensure that FHA loans approved for mortgage insurance are eligible and acceptable
according to FHA rules and regulations. The restrictive covenants identified placed a prohibited
restriction on the conveyance by a third party of the FHA properties, conflicting with the lender’s
certification that the loans met HUD-FHA insurance requirements defined in 24 CFR
203.41(a)(3).

HUD Handbook 4155.1, paragraph 4.B.2.b, states, “FHA security instruments require a borrower
to establish bona fide occupancy in a home as the borrower’s principal residence within 60 days
of signing the security instrument, with continued occupancy for at least one year.” However,
these security instruments would be between the lender and borrower, not a third party like the
seller. Extra emphasis must be placed on the fact that the conveyance of the property during the

14
     The CFR includes exceptions; however, the exceptions do not apply in this case.




                                                           6
occupancy period was limited by the seller, which violated HUD-FHA requirements 24 CFR
203.41(b) defined at 24 CFR 203.41(a)(3)(ii) and 203.41(a)(3)(iv). The following are excerpts
from two versions of the recorded restrictive covenants found between the seller, a third party to
the FHA loans, and borrowers.
                                            Version 1




                                            Version 2




                                                7
The above examples illustrate the language contained in the restrictive covenants identified;
specifically, that the property cannot be conveyed without limitations imposed by the seller until
the occupancy period is over, which is contrary to the HUD-FHA free assumability requirements
defined in 24 CFR 203.41(a)(3)(ii) and 203.41(a)(3)(iv). A distinction is that the restrictive
covenants, while ineligible, do not necessarily prevent FHA from obtaining clear title in the
event of foreclosure and conveyance. This distinction does not, however, alter the material fact
that the loans should not have reached the point of foreclosure and conveyance as they were not
eligible for FHA mortgage insurance.

We also identified potential lien language, which stipulated monetary damages to the seller in the
event of a breach in the agreement (see versions 1 and 2 above). A breach of the contract would
include the borrower’s conveying or transferring the property during the specified occupancy
period, which could result in a lien that is prohibited by 24 CFR 203.32.

CTX Mortgage officials stated the prohibited restrictive covenants were allowed because they
believed that the restrictive language, coupled with an owner occupancy requirement, were
consistent with FHA requirements. Therefore, they allowed the use of sellers’ restrictive
covenants on FHA properties. However, based on this information, we concluded that CTX
Mortgage did not exercise due diligence, demonstrated by its failure to ensure that language in
the recorded property agreements was appropriate and followed HUD rules and regulations.

Materiality

Consistent with prior HUD findings, we determined the existence of unallowable restrictive
covenants to be a significant, material deficiency. In prior reviews, HUD identified unallowable
restrictive covenants as a violation of Federal regulations and FHA requirements, considering the
violations a material, serious deficiency, stating that loans with prohibited restrictive covenants
were ineligible for FHA insurance. For the active loans reviewed, HUD determined that
indemnification was appropriate if the lender could not provide adequate support indicating a
termination of any restrictive language. Our recommendations are made in the same regard.

The FHA loans identified in this memorandum were determined to be ineligible for FHA
insurance; therefore, any loss or claim tied to the loans identified represents an unnecessary loss
to HUD’s FHA insurance fund. As with any underwriting review, deficiencies identified, such
as overstated income and understated liabilities, do not have to be the reason an FHA loan went
into default or claim for HUD to seek indemnification. Rather, the deficiencies are used as
evidence that the loan should not have been FHA insured. In the same regard, the audit
memorandum identifies a significant material deficiency that deemed the identified loans




                                                 8
ineligible for FHA insurance, thereby warranting recommendations for indemnification of the
loans identified.

According to the FHA Emergency Fiscal Solvency Act of 2013, 15 indemnification should be an
appropriate remedy when HUD has suffered a loss tied to a loan that was not originated or
underwritten appropriately. It states that if the HUD Secretary determines that the mortgagee
knew, or should have known, of a serious or material violation of the requirements established
by the Secretary, such that the mortgage loan should not have been approved and endorsed for
insurance, and HUD pays an insurance claim with respect to the mortgage, the Secretary may
require the mortgagee to indemnify HUD for the loss, irrespective of whether the violation
caused the mortgage default. This pending legislation illustrates Congress’ specific intent to
protect the FHA mortgage insurance fund and ensure its solvency by providing HUD with the
appropriate tools and remedies.

Impact and Risk for Losses

We identified 683 loans (128 claim loans and 555 active loans) within our audit period that had
unallowable restrictive covenants on the FHA-insured properties. The third-party agreements,
which contained the prohibited restrictive covenants preventing free assumability of the property
and potential liens between the seller and borrowers, violated HUD-FHA requirements defined
in 24 CFR 203.41(a)(3) and 203.32, respectively, thereby materially impacting the insurability of
the questioned loans, making the loans ineligible for FHA insurance. Additionally, the
borrowers in the restrictive covenant agreements were restricted in their ability to rent, lease,
sell, or otherwise convey the FHA properties. By allowing the restrictive conveyance
agreements on FHA properties that at minimum appeared to hinder free assumability, CTX
Mortgage may have forced borrowers with decreasing financial capability to remain in their
property longer than they would have otherwise.

As a result, CTX Mortgage’s failure to exercise due diligence placed the FHA fund at
unnecessary risk for potential losses by approving ineligible properties for FHA insurance and
restricting borrowers’ ability to rent, lease, sell, or otherwise convey the FHA properties and
included language for remedies if the contract was breached. Of most significance, insuring
properties that are not eligible for mortgage insurance increases the risk to an FHA fund that is
already facing dangerously low levels of funding. For the 136 loans identified, HUD would not
otherwise see a loss on the uninsurable FHA loans, as they would not have been approved for
FHA insurance and would not be the responsibility of the FHA fund. For the 51 claim loans
identified as ineligible for FHA insurance, HUD suffered a loss it should not have otherwise
suffered.

Conclusion

CTX Mortgage did not follow HUD requirements regarding free assumability and liens when it
underwrote loans that had executed and recorded agreements between sellers and the FHA

15
  Pending legislation, House Resolution 1145, sponsored by Congresswoman Maxine Waters and Congressman
Michael E. Capuano on March 13, 2013. It was reintroduced under the 113th Congress after the 112th Congress
referred it to the Committee on Banking, Housing, and Urban Affairs.




                                                      9
borrower, containing prohibited restrictive covenants and potential liens in connection with
FHA-insured properties. We identified 683 loans (128 claim loans and 555 active loans) within
our audit period that did not meet the requirements for FHA insurance, thereby rendering them
ineligible for FHA insurance. CTX Mortgage’s failure to exercise due diligence allowed
prohibited restrictive covenants with the potential for liens on the FHA-insured properties, which
rendered the loans uninsurable. These uninsurable loans placed the FHA fund at unnecessary
risk for potential losses because HUD would not otherwise see a loss on loans not insured by the
FHA fund. Of the 136 (128 claim loans and 8 sampled active loans) loans reviewed where a
prohibited restrictive covenant was found, 51 resulted in an actual loss to HUD of more than $5.2
million. Another 77 of these loans had claims paid totaling more than $7.9 million. The
remaining eight loans found with prohibited restrictive covenants had a total unpaid mortgage
balance of more than $1.5 million with an estimated loss to HUD of more than $892,000 (see
appendix C).

                                         RECOMMENDATIONS

We recommend that HUD’s Associate General Counsel for Program Enforcement

1A.     Determine legal sufficiency and if legally sufficient, pursue civil remedies (31 U.S.C.
        (United States Code) Sections 3801-3812, 3729, or both), civil money penalties (24 CFR
        30.35), or other administrative action against CTX Mortgage, its principals, or both for
        incorrectly certifying to the integrity of the data or that due diligence was exercised
        during the origination of FHA-insured mortgages.

We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require CTX
Mortgage, after completion of recommendation 1A, to

1B.     Reimburse the FHA fund for the $5,285,281 in actual losses resulting from the amount of
        claims and associated expenses paid on 51 loans that contained prohibited restrictive
        covenants and potential liens (see appendix C, table 1).

1C.     Support the eligibility of $7,975,892 in claims paid or execute an indemnification
        agreement requiring any unsupported amounts to be repaid for claims paid on 77 loans
        for which HUD has paid claims but has not sold the properties (see appendix C, table 2).

1D.     Analyze all FHA loans originated, including the eight active loans identified in this
        memorandum, or underwritten beginning January 1, 2008, and nullify all active
        restrictive covenants or execute indemnification agreements that prohibit it from
        submitting claims on those loans identified. The eight active loans with prohibited
        restrictive covenants had a total unpaid mortgage balance of $1,564,969, which carries a
        potential loss of $892,032 16 that could be put to better use (see appendix C, table 3).


16
  The potential loss was estimated based on HUD’s 57 percent loss severity rate, multiplied by the unpaid mortgage
balance. The 57 percent loss rate was the average loss on FHA-insured foreclosed-upon properties based on HUD’s
Single Family Acquired Asset Management System’s “case management profit and loss by acquisition” as of
December 2012.




                                                       10
Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE


        Recommendation                                  Funds to be put
                       Ineligible 1/     Unsupported 2/
        number                                          to better use 3/
                    1B        $5,285,281
                    1C                       $7,975,892
                    1D                                         $892,032
                 Total        $5,285,281     $7,975,892        $892,032

1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. If HUD
     implements our recommendations to indemnify loans not originated in accordance with
     HUD-FHA requirements, it will reduce FHA’s risk of loss to the fund. See appendix C
     for a breakdown, by FHA loan number, of the funds to be put to better use.




                                             11
Appendix B
        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         12
Comment 2

Comment 3

Comment 3

Comment 1
Comment 4

Comment 1
Comment 5


Comment 3




Comment 3

Comment 6

Comment 7


Comment 3




            13
Comment 8




Comment 3
Comment 1
Comment 9
Comment 3

Comment 6

Comment 7

Comment 10




             14
Comment 11




Comment 1




             15
Comment 12

Comment 13

Comment 12
Comment 14


Comment 15




Comment 1




             16
Comment 1




Comment 1



Comment 16
Comment 1


Comment 17
Comment 1




             17
Comment 18




Comment 1



Comment 16


Comment 1


Comment 3
Comment 9

Comment 3




Comment 1




             18
Comment 19

Comment 3

Comment 1

Comment 6

Comment 5




Comment 20

Comment 1




Comment 1




             19
Comment 15


Comment 1



Comment 3




Comment 21



Comment 22




             20
Comment 22


Comment 23

Comment 3

Comment 9
Comment 1

Comment 6



Comment 3




Comment 1




Comment 23
Comment 3




             21
Comment 9

Comment 1

Comment 20


Comment 1


Comment 5


Comment 1
Comment 3
Comment 22



Comment 24

Comment 1


Comment 3
Comment 9




             22
Comment 3



Comment 1

Comment 3

Comment 6
Comment 1
Comment 5

Comment 3



Comment 3




Comment 6
Comment 3

Comment 11

Comment 3




             23
Comment 25

Comment 9

Comment 3




             24
                               OIG Evaluation of Auditee Comments


Comment 1       We disagree with CTX Mortgage’s assessment of the OIG review. Specifically,
                we disagree with CTX Mortgage’s interpretation of FHA requirements. These
                assessments include:

                    •   The prohibited restrictive covenants tracked FHA’s own underwriting
                        requirements by discouraging “flippers” from fraudulently
                        misrepresenting their occupancy intentions and did so in a manner entirely
                        consistent with FHA guidelines;

                    •   The prohibited restrictive covenants were consistent with and did not
                        violate FHA regulations; and

                    •   The restrictive covenant language contained in the agreements signed by
                        the seller and borrower “tracks” the language in the “FHA Mortgage
                        Form” 17 that would make it viewed as permissible or compliant with FHA
                        regulations.

                To clarify, the audit memorandum findings do not take exception with the owner
                occupancy language as stated by CTX Mortgage. What CTX Mortgage does not
                address is that the prohibited restrictive covenants identified go beyond merely
                requiring owner occupancy, actually placing restrictions on the mortgage deed
                that violate HUD FHA regulations. A violation would not have occurred had the
                cited agreements merely required a one year occupancy. However, that was not
                the case. The audit memorandum discussed the agreement being between a third
                party to the mortgage, the seller, and the borrower as well as the agreement
                containing provisions for damages to the seller in the event of a breach, which
                violated 24 Code of Federal Regulation 203.41 and 203.32 respectively. By CTX
                Mortgage’s own admission, the seller “would agree not to enforce the
                Provision…” again illustrates the fact that the buyer must get the seller’s
                permission is a violation of 24 CFR 203.41(a)(3)(iv), the seller being considered a
                third party.

                Any reference in CTX Mortgage’s response to tracking or adhering to FHA
                guidelines is incorrect. The regulations under 24 CFR 203.41(a)(3), for free
                assumability of the property, emphasize the prohibition of a restriction where the
                conveyance of a property be subject to the consent of a third party, in this case the
                seller, and that such a document cannot be the basis of contractual liability of the
                borrower for breach of an agreement not to convey. The findings and related
                examples illustrate the agreements in question are between the seller and
                borrower and include provisions for damages to the seller if the borrower conveys

17
  The “Supplement B” contained in CTX Mortgage’s response contained a poor copy of the “FHA Mortgage Form”
and therefore was omitted from inclusion in appendix B of this audit memorandum. However, relevant excerpts
were included below.




                                                    25
the property during the occupancy period, which clearly violate HUD FHA
requirements. The violations make each identified loan ineligible for FHA
mortgage insurance.
A significant, material distinction exists; the “FHA Mortgage Form” cited by
CTX Mortgage is the mortgage note between the lender and borrower, whereas
the prohibited restrictive covenant discussed in the audit memorandum is between
the seller, a third party to the mortgage, and the borrower. Additionally, the
“FHA Mortgage Form” cited does not contain language that creates a basis of
additional contractual liability of the borrower for breach of the agreement not to
convey, see excerpt of Section 5 below.
        Start of “FHA Mortgage Form” – Between Borrower and Lender




                       Section 5 of “FHA Mortgage Form”




                                26
            We would like to clarify that the “FHA Mortgage Form” section 9, “Grounds for
            Acceleration of Debt” paragraph (a) are limited by regulations issued by the
            Secretary and paragraph (b) is subject to applicable law and with prior approval of
            the Secretary. In both these instances the “FHA Mortgage Form” discusses
            acceleration of debt at the approval of the Secretary rather than the creation of an
            additional liability to the seller that is found in the restrictive covenants recorded
            with applicable counties.
                                  Section 9(a) of “FHA Mortgage Form”




                                  Section 9(b) of “FHA Mortgage Form”




Comment 2   To clarify, the audit memorandum does not, at any point, state that prohibited
            restrictive covenants were put in place for “pernicious reasons.” Rather, the
            memorandum reports on OIG’s findings, based on specific audit objectives, that
            violations did in fact occur.

Comment 3   We strongly disagree with CTX Mortgage’s assertion that the OIG memorandum
            serves to threaten tens of millions of dollars in indemnity claims, solely because
            CTX provided mortgages to these homeowners. We also disagree with CTX
            Mortgage that the OIG’s recommendations to FHA for reimbursement and
            indemnification and a referral to HUD Office of Enforcement are completely
            without merit. The basis for recommending indemnification was in the OIG’s
            determination, consistent with HUD’s prior findings on similar violations where
            prohibited restrictive covenants were cited as a material, statute violation. Losses
            tied to loans that should not have received FHA mortgage insurance should
            appropriately be reimbursed to the FHA mortgage insurance fund or indemnified.
            The OIG recommendations are addressed to HUD for appropriate action,



                                             27
fulfilling a public obligation to ensure HUD funds are safeguarded and spent
appropriately. See also comment 1.

The recorded prohibited restrictive covenants impacted the insurability of the
reviewed loans. CTX Mortgage had a duty to ensure loans it approved for FHA
insurance were in accordance with all HUD FHA rules and regulations. The FHA
loans identified were determined to be ineligible for FHA insurance; therefore,
any loss or claim tied to the loan presents an unnecessary loss to HUD’s FHA
insurance fund. As with any underwriting review, deficiencies identified, such as
overstated income and understated liabilities, do not have to be the reason an FHA
loan went into default or claim for HUD to seek indemnification. Rather, the
deficiencies are used as evidence that the FHA loan should not have been FHA-
insured. In the same regard, the audit memorandum identifies a significant
material deficiency that deemed the identified loans ineligible for FHA insurance;
thereby warranting recommendations for indemnification of the loans identified.

CTX Mortgage’s assertion that neither the homebuyers nor the FHA insurance
fund was harmed is incorrect. The prohibited restrictive covenants all carried the
potential to harm FHA buyers. The scope of our audit was narrow and specific, to
identify the presence of unallowable restrictive covenants and to determine if
those restrictions violated HUD rules and regulations. To that end, we concluded
that there were prohibited restrictive covenants, which violated Federal statute
and were not eligible for FHA insurance; therefore, any loss or claim tied to the
loans identified represents an unnecessary loss to HUD’s FHA insurance fund.

As outlined in the audit memorandum, we specifically addressed the materiality
of the findings. The OIG takes all potential and appropriate corrective actions
into account when developing audit recommendations and those
recommendations are addressed to HUD, not CTX Mortgage, for corrective
action. For clarification, recommendation 1A recommends HUD’s Associate
General Counsel for Program Enforcement to determine legal sufficiency for civil
action. It is OIG’s responsibility to refer violations that may rise to the level that
may warrant civil action to the HUD’s Office of Program Enforcement for its
consideration. It is that office’s responsibility to evaluate the violations and
determine what, if any, civil action is warranted. Treble damages are not stated
anywhere in the recommendation or audit memorandum.

Based on our conclusions, it was our duty and obligation to HUD and other
stakeholders, including the American public, to recommend HUD take necessary,
appropriate action. In HUD’s prior actions, it also deemed the deficiency
significant enough to warrant indemnification. We believe the recommendations
contained in the audit memorandum are fair, consistent, and appropriate given the
materiality of the OIG finding. Therefore, the recommendations remain
unchanged.




                                  28
Comment 4   CTX Mortgage’s statement that the audit memorandum’s interpretation of FHA
            regulations is so inappropriately aggressive that FHA’s own documents would
            violate the OIG’s reading of its terms, is incorrect and without merit. We
            identified a specific situation, compared the restrictive language found to FHA
            regulations, and determined the recorded agreements violated HUD FHA
            regulations. HUD’s Office of Single Family Housing has made a similar
            determination in similar situations. See comments 1 and 16 for detailed
            explanations.

Comment 5   CTX Mortgage is incorrect in assuming that restrictive covenant agreements were
            acceptable because FHA conducted post-endorsement reviews. Such assumptions
            are dangerous and should never be a substitute for reviewing and applying the
            actual HUD FHA regulations. These reviews were not necessarily all inclusive in
            scope and may not have included methodology to search public records for
            documents recorded in conjunction with the FHA-insured loans.

Comment 6   To clarify, the audit memorandum does not state that CTX Mortgage “acted
            knowingly or with reckless disregard resulting in a false, fraudulent, or fictitious
            claim to FHA” as implied by CTX Mortgage’s response. See also comment 2.

Comment 7   CTX Mortgage stated that no further actions are needed because the provision
            term in the prohibited agreements has expired for these loans. We acknowledge
            CTX Mortgage’s efforts to address the audit memorandum findings. Although,
            the findings cited restrictive covenants with an occupancy period of twelve or 24
            months, there is a possibility that longer occupancy periods related to other loans
            exist. HUD will review the adequacy of CTX Mortgage’s analysis during the
            audit resolution process to determine if it was sufficient to satisfy the audit
            recommendations. We also acknowledge that CTX Mortgage no longer makes
            FHA loans and voluntarily withdrew its FHA loan status in 2010. As a result, we
            have removed recommendation 1E, which recommended that HUD ensure that
            the lender follow 24 CFR 203.32 and 203.41.

            Although the loans in question have an expired agreement, the presence of the
            restrictive covenant should have prevented them from reaching the point of
            receiving FHA mortgage insurance. Recommendations 1B, 1C, and 1D of the
            audit memorandum first seek reimbursement for the ineligible loans with an
            actual known loss, support or indemnification for those with claims but no known
            loss, and finally to nullify active loans with such restrictions or indemnify said
            loans. See also comment 3.

Comment 8   To clarify we reviewed public records for 842 loans (770 claim loans and 72
            statistically sampled active loans) and found that, of these, 136 (128 claim loans
            and 8 statistically sampled active loans) had unallowable restrictive covenants.
            The 8 statistically sampled active loans were projected to the universe of active
            loans (see Methodology and Scope section of the audit memorandum), resulting
            in an estimated 555 active loans with similar issues. Therefore, we reported that




                                             29
              there were 683 loans (128 claim loans and 555 active loans) with unallowable
              restrictive covenants.

Comment 9     We disagree with CTX Mortgage that it is unreasonable to expect that it would
              treat these as a violation of FHA requirements because of the unclear nature of the
              regulations in question and FHA’s own documents. FHA regulations at 24 CFR
              203.41 and 203.32 specifically prohibit restrictive covenants as identified in the
              audit memorandum. Additionally, HUD has previously determined that
              prohibited restrictive covenants were serious, material deficiencies that deemed
              FHA loans ineligible for mortgage insurance. Whether intentional or not, CTX
              Mortgage, as the underwriter, is responsible for ensuring the loan and its title
              instruments meet all HUD rules and regulations. As stated in the audit
              memorandum, HUD Handbooks 4000.2, paragraph 5-1(B), and 4155.2, paragraph
              6.A.1.h, both state that it is the lender’s responsibility at loan closing to ensure
              that any conditions of title to the property are acceptable to FHA. In essence, it is
              the duty of the lender to ensure that FHA loans approved for mortgage insurance
              are eligible and acceptable according to FHA rules and regulations. We also
              disagree that the requirements were unclear and that the FHA documents were
              consistent with the agreements between the seller and borrower, see comment 1.

Comment 10 CTX Mortgage’s conclusion that, because there is no evidence that the
           builder/seller actually exercised its rights under the agreement, therefore, no
           remediation is necessary is not material to the issues identified in the audit
           memorandum because violating 24 CFR 203.41 and 302.32 rendered the loans
           ineligible for FHA insurance. To that end, the recommendations specifically
           address the deficiencies identified, utilizing appropriate remedial options
           available to HUD and OIG. See also comment 3.

Comment 11 OIG acknowledges CTX Mortgage’s explanation of intent and history. However,
           this does not lift the burden from CTX Mortgage to ensure all FHA loans
           approved for FHA mortgage insurance adhere to all HUD FHA regulations. See
           also comment 1.

Comment 12 During the audit, the OIG auditors determined the restrictive covenants were in
           violation of HUD FHA regulations. The internal legal opinion cited by CTX
           Mortgage was used only as additional support that restrictive covenants are
           unallowable and violate FHA rules and regulations. The legal opinion was
           obtained and reviewed after we conducted our own analysis and came to our own
           conclusion that HUD requirements were violated by the execution and recording
           of the restrictive covenants.

Comment 13 We agree with CTX Mortgage; the audit memorandum has been revised to reflect
           the correct citation as 24 CFR 203.41(b).

Comment 14 As discussed during the exit conference, the original discussion draft
           memorandum to CTX Mortgage excluded the citation of 24 CFR 203.41(a)(3)(ii),




                                               30
              agreeing that this would be incorporated into the final memorandum. As a result,
              the audit memorandum has been updated to include this citation.

Comment 15 We disagree with CTX Mortgage’s statement that the cause included in the audit
           memorandum was quite a different assertion than that initially offered by the OIG
           in its draft finding outline. The cause included in the finding outline provided to
           CTX Mortgage stated, “This occurred because CTX Mortgage officials believed
           that the documents with the restrictive covenants, which contain an owner
           occupancy requirement, were consistent with FHA requirements and would in-
           turn help protect FHA from fraud.” However, we simplified the cause in the audit
           memorandum to state, in part that CTX Mortgage “was unaware that the
           restrictive covenants recorded between the sellers and the borrowers violated
           HUD-FHA requirements.”

              Additionally, CTX Mortgage commented in its response that our statement that
              CTX Mortgage was “unaware” that the restrictive covenants were a violation was
              a mischaracterization. A CTX Mortgage official clarified that in its opinion it was
              reasonable to believe that the provisions were permissible under 24 CFR 203.41
              and it offered the loans for insurance in good faith. As a result, we have revised
              the audit memorandum “Restriction on Conveyance” section to incorporate more
              of the original language from the finding outline and the clarification provided by
              a CTX Mortgage official.

              CTX Mortgage was notified that the finding outline was a working document and
              the draft form was presented as a courtesy to enhance open communication and
              keep CTX Mortgage informed of the OIG’s progress and tentative conclusions in
              advance of the draft audit memorandum. The “Supplement A” contained in CTX
              Mortgage’s response contained a copy of a working document that was not
              intended for an external audience and therefore has been omitted from inclusion
              in appendix B of this audit memorandum.

Comment 16 CTX Mortgage’s logic is flawed and does not appear to understand or make the
           distinction that the prohibited agreements in question are between the borrower
           and seller, a third party, and not between the borrower and lender. It is incorrect
           and inappropriate for CTX Mortgage to compare two clearly different
           agreements. See also comment 1.

Comment 17 CTX Mortgage does not appropriately apply the HUD FHA regulations. The
           exceptions at 24 CFR 203.512, as discussed in its response, do not apply.

Comment 18 CTX Mortgage presents hypothetical scenarios that are not relevant to the facts of
           OIG’s findings. The audit memorandum presented specific instances that violated
           HUD FHA regulations, as determined separately by HUD and OIG. See also
           comment 1.




                                              31
Comment 19 We determined that CTX Mortgage’s conclusion that “the OIG fails to recognize
           that the liens imposed by the Provision are not in any way material to any claims
           offered on the loans by CTX or anyone else”, was irrelevant because the liens
           violated 24 CFR 203.32 rendering them ineligible for insurance. Therefore, the
           materiality to any claim offered on the loans is not relevant to the issue.

Comment 20 The intention behind 24 CFR 203.41(b) is not in question. The audit scope
           focused solely on CTX Mortgage and its practices and was not an internal review
           of HUD and its regulations and policy decisions. The prohibited restrictive
           covenants identified violated HUD FHA regulations, thereby rendering them
           ineligible for FHA insurance. To that end, the intention behind the regulations do
           not change the fact that what occurred did not meet the stated requirements for
           insurance. See also comments 1 and 3.

Comment 21 We agree with CTX Mortgage and acknowledge that the FHA Reform Act of
           2010 was never finalized. However, this legislation has been updated and was
           reintroduced to the U.S. House of Representatives and is now known as the “FHA
           Emergency Fiscal Solvency Act of 2013.” This legislation clearly indicates the
           U.S. Congress’ specific intent to protect and ensure the fiscal solvency of the
           FHA mortgage insurance fund. The audit memorandum has been updated
           accordingly and reflects the new, updated pending legislation. As a result, there
           was no need to include CTX Mortgage’s “Supplement C” in appendix B of the
           audit memorandum.

Comment 22 We disagree with CTX Mortgage’s claim that the OIG’s position is that any
           technical breach may serve as a basis for indemnification. The OIG reviews each
           situation independently and makes determinations on specific facts and merits. In
           this specific circumstance, the conditions for free assumability of the loan, as well
           as no additional liens outside the mortgage (with some exceptions noted in the
           CFR), were required to be met for the loan to be eligible for FHA mortgage
           insurance. We disagree that indemnification should only be utilized for
           traditional underwriting deficiencies (overstated income, understated liabilities,
           etc.). This interpretation opens a wide door for violations other than your typical
           underwriting deficiencies and sets a bad precedent to violating lenders.
           Therefore, in OIG’s assessment, indemnification is an appropriate remedy in these
           instances because it provides the remedy of alleviating any loss or potential loss
           on the loans from impacting the FHA mortgage insurance fund, as would be the
           case if the loans were not insured. Ultimately, the recommendations are directed
           to HUD for it to assess and enter in to a management agreement during the audit
           resolution process with OIG on the appropriate course of action. See also
           comment 3.

Comment 23 We acknowledge CTX Mortgage’s admission that had it known the loans in
           question were in violation of HUD FHA regulations it would have taken
           corrective actions. Unfortunately, the violations have already occurred, and need
           to be remedied. See also comment 9.




                                              32
Comment 24 We strongly disagree with CTX Mortgage’s interpretation that the audit
           memorandum stated, “CTX falsely certified that loans with recorded Provisions
           that it offered for insurance were in compliance with FHA regulations.” Rather
           the audit memorandum states, “For each FHA loan, the lender certifies on the
           Direct Endorsement Approval for HUD/FHA-Insured Mortgage (form HUD-
           92900-A) that the mortgage was eligible for HUD mortgage insurance under the
           direct endorsement program.”

Comment 25 We strongly disagree with CTX Mortgage’s assertion that the audit memorandum
           demonstrates a failure to understand the purpose behind implementation of the
           prohibited agreements and the reasonableness of the position that the prohibited
           agreements did not violate FHA regulations. Also, CTX Mortgage’s response
           incorrectly attempts to explain HUD’s policy on implementing regulations and
           incorrectly interprets HUD FHA regulations. Additionally, CTX Mortgage
           inappropriately attempted to compare different agreements between the borrower
           and lender and the borrower and seller. As previously stated, the purpose behind
           the implementation of the restrictive covenants between the seller and borrower
           are irrelevant in light of the fact that ultimately the agreements violated 24 CFR
           203.41 and 203.32, which rendered the loans ineligible for FHA insurance. See
           also comments 1, 3, 9, and 17.




                                             33
Appendix C
                      SUMMARY OF FHA LOANS REVIEWED

                                        Table 1 - Actual loss to HUD
                                         Claim loan review results

                                  FHA loan               Recommendation 1B –
                                   number                 actual loss to HUD 18
                                023-2546269          $                     121,117
                                023-2548890                                126,026
                                023-2600006                                 88,235
                                023-2606940                                145,987
                                023-2607141                                126,630
                                023-2616505                                103,522
                                023-2626186                                 98,712
                                023-2633187                                142,431
                                023-2636551                                 87,048
                                023-2638359                                112,013
                                023-2639926                                129,636
                                023-2640282                                168,994
                                023-2645865                                107,228
                                023-2657871                                108,495
                                023-2658846                                107,739
                                023-2658983                                106,524
                                023-2662210                                 74,477
                                023-2664018                                126,980
                                023-2667860                                117,650
                                023-2670246                                 83,796
                                023-2672962                                 85,904
                                023-2678393                                 80,538
                                023-2687270                                 83,590
                                023-2692894                                 81,660
                                023-2702979                                 83,748
                                023-2711748                                157,221
                                023-2734119                                125,693


18
     The actual loss to HUD was obtained from HUD’s Single Family Data Warehouse in January 2013.




                                                         34
 FHA loan         Recommendation 1B –
  number           actual loss to HUD 18
023-2736575                        102,241
023-2739956                        132,773
023-2754188                        121,564
023-2767963                        134,039
023-2802986                         90,700
023-2808756                        136,593
023-2831845                        128,621
023-2841372                        115,348
023-2845923                         87,206
023-2859236                         94,425
023-2866742                         77,698
023-2881710                        123,397
023-2892517                        103,099
023-2895863                         27,878
023-2903499                         36,378
023-2904965                         79,155
023-2909848                        139,167
023-2915583                        111,594
023-2919011                        133,594
105-4956949                         65,322
461-4231022                         71,920
521-6513170                         50,964
521-6534720                         77,055
521-6566978                         62,956
   Total      $                 5,285,281




                  35
                                    Table 2 - Claims paid, loss unknown
                                         Claim loan review results

                            FHA loan         Recommendation 1C – claims paid
                             number             but no actual loss known 19
                           023-2592234       $                         245,569
                           023-2608407                                  77,597
                           023-2610236                                 127,818
                           023-2621330                                  98,149
                           023-2623383                                 106,516
                           023-2623955                                 111,873
                           023-2624343                                 112,760
                           023-2625313                                  83,370
                           023-2633401                                 116,437
                           023-2636522                                  71,247
                           023-2637898                                  79,351
                           023-2645842                                 116,396
                           023-2650077                                 181,686
                           023-2655567                                  74,667
                           023-2674616                                 172,654
                           023-2683472                                  67,499
                           023-2687807                                  93,501
                           023-2687894                                 140,582
                           023-2700144                                  69,971
                           023-2703242                                  66,924
                           023-2705106                                  76,636
                           023-2711958                                 135,517
                           023-2740586                                  95,716
                           023-2744037                                 130,280
                           023-2745134                                  86,595
                           023-2775375                                 110,111
                           023-2778523                                 107,621
                           023-2780369                                  79,236
                           023-2780375                                 133,105
                           023-2780431                                  89,948
                           023-2780629                                 102,228
                           023-2785097                                 124,095

19
     The claims paid values were obtained from HUD’s Neighborhood Watch system in January 2013.




                                                       36
 FHA loan     Recommendation 1C – claims paid
  number         but no actual loss known 19
023-2799995                             140,129
023-2808359                             112,315
023-2841343                              88,287
023-2853551                             132,926
023-2888891                              88,728
023-2893783                             117,219
023-2897450                             103,133
023-2909218                              79,742
023-2909384                              93,635
023-2909594                             117,716
023-2912138                              98,737
023-2915061                              94,562
023-2916986                             118,084
023-2919335                              99,976
023-2921566                              93,127
023-2962679                             104,922
023-2967879                              82,765
023-3018979                             124,872
023-3030283                             265,986
023-3205064                             100,457
091-4329487                              79,615
091-4334701                              72,087
091-4353253                              74,503
091-4365195                              71,098
091-4374825                              55,733
091-4401914                              70,797
093-6334717                              69,256
093-6399855                             178,543
093-6419500                              84,063
093-6469471                              49,946
093-6483725                              85,479
094-5336489                             123,610
094-5358189                             118,871
094-5358195                              71,622
094-5392235                              57,712
094-5448596                             107,234




                     37
 FHA loan     Recommendation 1C – claims paid
  number         but no actual loss known 19
094-5472782                             145,958
094-5486781                              96,653
094-5770285                              70,178
094-5876266                              63,051
094-5936786                              72,410
095-0546694                             144,893
461-4248454                              49,851
521-6585490                             185,704
521-6619326                              34,052
   Total      $                       7,975,892




                     38
                                     Table 3 - Potential loss to HUD
                                       Active loan sample results

                FHA loan             Unpaid mortgage            Recommendation 1D –
                 number                 balance 20           potential loss on active loans16
               023-2743561           $       166,335         $                         94,811
               023-2908757                   117,703                                   67,091
               023-3174732                   235,507                                 134,239
               091-4390312                   266,653                                 151,992
               094-5353674                   225,299                                 128,420
               094-5379222                   137,122                                   78,160
               094-5505483                   169,091                                   96,382
               461-4624996                   247,259                                 140,938
                    Total           $         1,564,969      $                         892,032 21




20
   The unpaid mortgage balance for each loan was obtained from HUD’s Single Family Data Warehouse in January
2013.
21
   This value differs from the column total by a dollar because the actual figures, which included cents, were
rounded.




                                                      39