Taylor, Bean and Whitaker in Trouble: FHA Expulsion
Mortgage lender Taylor, Bean and Whitaker Mortgage Corp. has been suspended from the Federal Housing Administration (FHA), on grounds of possible fraud.
According to the FHA, Taylor Bean failed to submit a mandatory annual financial report and did not reveal they had unresolved issues with an independent auditor, which had found "irregular transactions that raised concerns of fraud".
The firm is the third-largest lender in the FHA, but may not survive the suspension, said David Lykken of consulting firm Mortgage Banking Solutions.
Taylor Bean and Whitaker is known for purchasing FHA mortgages from new lenders during their probationary periods with the agency, something most other lenders refuse to do. The firm also has a reputation of being "less strict" when underwriting FHA and "conventional" mortgages (which may be sold to mortgage companies such as Fannie Mae, who are supported by the government).
“I’ve heard it said it’s good that we have Taylor Bean there because no one else will buy these loans,” Lykken said. “To say they’re a bottom-feeder may be too strong a statement, but that’s how they’re viewed in a lot of cases.”
Some fear that considerable repercussions may result from the fall of Taylor Bean. Based in Ocala, Florida, the firm handles business from all over the United States and accounted for $17 billion in loans during the first half of 2009. According to Michael Moskowitz, president of New York lender Equity Now Inc., mortgage rates may rise with Taylor Bean's fall, due to the loss of competition.
“It’s just a question of demand and supply,” he said in a telephone interview yesterday. “If Taylor Bean goes down, it’s a pretty big deal.”