A government audit of 41 FHA-backed mortgage loans made by National City Bank and that later ended up in default found that nearly half didn’t meet federal underwriting standards.
The audit found National City didn’t verify employment histories and credit references, overstated applicants’ assets, or exceeded debt-to-income ratios on 20 of the loans, The Columbus Dispatch reported.
National City disputed the findings, saying the company has a good track record as one of the largest FHA lenders in the country. A National City spokeswoman said the company agreed there were underwriting errors in seven loans.
“To put that into context, the OIG audited only defaulted loans, and we have more than 150,000 FHA total loans in our servicing portfolio,” National City spokeswoman Kelly Wagner-Amen told the Dispatch. She said National City’s default rate of 12.5 percent is below the national average of 16.4 percent.
National City faces up to $148,000 in fines and could be required to back $1 million in loans if regulators conclude they did not meet underwriting standards.