Allied Mortgage Hit with DOJ Suit, HUD Suspension

The Department of Housing and Urban Development (HUD) and Ginnie Mae have suspended Allied Home Mortgage Corporation, thereby preventing the company from originating and underwriting new mortgages insured by the Federal Housing Administration (FHA) or issue securities through Ginnie Mae's Mortgage-Backed Securities program. The suspensions include by name the company's president and chief executive officer, James C. Hodge, and its executive vice president and chief compliance officer Jeanne L. Stell and come in the wake of a suit filed earlier in the day by the Justice Department (DOJ) in the U.S. District Court in Manhattan against the company and its two officers.

The suit alleges that Allied, one of the largest of the lenders approved to write for FHA, had engaged in fraudulent lending practices that have cost the government more than $834 million in FHA insurance claims. The suit said that the lenders had engaged "in reckless mortgage lending, flouting the requirements of the FHA mortgage insurance program, and repeatedly lying about its compliance."