Allied Home sues HUD for stopping privileges

Allied Home Mortgage Corporation recently filed a lawsuit against the U.S. Department of Housing and Urban Development for suspending the lender's ability to write Federal Housing Authority insured home loans. The suit was in response to HUD's recent lawsuit against Allied Home Mortgage for alleged fraudulent lending practices.

James Hodge, founder and CEO of Allied Home Mortgage, formally filed the suit against HUD secretary Shaun Donovan, Bloomberg reported. When federal prosecutors sued Allied for shoddy practices, the HUD also suspended the firm's ability to create FHA-insured mortgage loans[,] which eliminates 70 percent of Allied's business. The lender's warehouse financing lines of credit also will cease under the government action.

“This means that Allied Corp. will not only be unable to originate FHA-insured mortgage loans, but Allied will also be unable to originate any sort of mortgage loans - whether FHA-insured or not,” said Allied attorney Kent Altsuler. "The HUD has improperly used its regulatory power of suspension to get, essentially, a combined temporary restraining order and preliminary injunction against Allied Corp. without any judicial review or due process."

The lawsuit against Allied filed by the government claims the lender had been lying to borrowers, and employees were siphoning loan proceeds for personal gains. The supposed misconduct has been going on within the company for seven years in at least 18 states, and this is the first time the government has impaired the lender's ability to issue new mortgages, Business Insider reported.

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