Wholesale Lender to Pay $9 Million over Non-Traditional Mortgages

Taylor, Bean & Whitaker Mortgage agreed to pay out $9m after the conclusion of a multi-state regulator examination of its underwriting, risk management and consumer disclosure practices in the 2006 origination of non-traditional mortgages — including interest-only, pay-option and stated income loans — a now-shuttered practice at the company. Ocala, Fla.-based Taylor, Bean & Whitaker (TBW) is one of the top 10 national wholesale mortgage lenders, according to company statements, meaning it funds loans originated by third-party brokers. In addition to instances of potential overcharging of fees to consumers, the state examinations unveiled possible issues in the submission stage by brokers where mortgage applications were submitted multiple times with various information altered until the automatic underwriting system accepted them, according to Andy Grosmaire, a spokesman in Florida’s Office of Finance Regulation. As part of the settlement, TBW will implement a loan modification plan to assist consumers struggling in these non-traditional loans and hire an independent loan review firm to study a portion of its non-traditional mortgages. The mortgage company will also pay $9m total: $4.5m to the Nationwide Mortgage Licensing System, which registers and tracks all mortgage lenders, and $4.5m to the states participating in the examination. “TBW looks forward to continuing its partnership with the states and its commitment to industry leadership as mortgage business best practices evolve,” said TBW chairman Lee Farkas. “TBW’s proactive steps in these areas,” Farkas added, “together with its financial contribution to mortgage licensing reform, demonstrate its commitment to leadership in the mortgage industry.” The examination, conducted by 14 state mortgage regulators, began in March 2008, after TBW discontinued the non-traditional products and implemented a “zero-tolerance” fraud policy in 2007, according to company statements. Write to Diana Golobay.