Audit: TN home loan lender reckless, put government dollars at risk


By Chris Butler | Tennessee Watchdog

NASHVILLE — Employees of a Brentwood home loan business were incapable of following Federal Housing Administration procedures and caused the feds to pay nearly $1 million in claims, according to a new Office of Inspector General audit.

The employees of Peoples Home Equity didn’t see to it that people they gave housing loans to could pay them back by failing to verify their income or their credit levels, among other issues, the audit said.

By not following procedures, they created high risks of default and foreclosure, according to the audit.

Office of Inspector General

“Specifically, 10 of 20 loans reviewed contained underwriting deficiencies,” the audit said, noting Peoples had a high number of default rates.

“This occurred because Peoples’ underwriters lacked knowledge, skills, and understanding of how to properly underwrite loans. As a result, Peoples exposed HUD to unnecessary insurance risk of more than $521,000 for six loans and caused HUD to pay more than $971,000 in claims for four loans.”

The mortgages for the 20 loans reviewed totaled more than $3.4 million, the audit said.

Tennessee Watchdog left several messages with Peoples seeking comment Tuesday and Wednesday. On Tuesday, an unnamed company representative said she would call back later in the day with contact information for the company’s attorney, but she never did.

On Wednesday, a Peoples’ representative, possibly the same woman, said she had referred the matter to the company’s president and that he would handle the matter. The company president, however, didn’t immediately return requests for comment Wednesday.

The audit examined the period between January 2009 and December 2013.

During that time, according to the audit, Peoples had underwritten 7,915 loans, of which 186, totaling $26 million, were seriously delinquent.

The FHA, under HUD, provides mortgage insurance on loans made by FHA-approved lenders throughout the country, according to the FHA website.

The FHA, created in 1934, is supposed to provide lenders with protection against losses as the result of homeowners defaulting on their mortgage loans, the website said, so lenders bear less risk.

The FHA’s mortgage insurance fund operates entirely from self-generated income from homeowner payments, not taxpayer money, the FHA’s website added.

Peoples Home Equity

Auditors detailed why they believed Peoples’ employees weren’t up to the job.

“The President and Director of Mortgage Compliance stated that they had experienced performance issues with their underwriters,” the audit said.

One underwriter responsible for eight of the 10 questionable loans is still employed with Peoples, although the audit said she has since received online and classroom training related to mortgage underwriting.

The other two underwriters involved are no longer with the company, the audit said.

HUD spokesman Joseph Phillips would only say Tuesday the agency has 120 days to respond to auditors’ recommendations, which include implementing and enforcing a quality control plan.

According to Peoples’ website, the 14-year-old company has clients nationwide and became a Full Eagle FHA Lender in 2007.

Contact Christopher Butler at

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