By Ian Mckendry

WASHINGTON (MNI) - The announcement Tuesday of an investigation by the government's housing authority into potential abuses of the its mortgage insurance program by lenders is part of a new strategy to targeting abusers of the system at the corporate level.

In a statement, Kenneth Donohue, the inspector general of the Department of Housing and Urban Development said, "This probe is a new type of approach in which HUD OIG is focused on corporate offices rather than individual branch offices. This is a starting point for more detailed reviews if abuses are uncovered, and the HUD OIG anticipates that more probes may follow."

Donohue told reporters that the subpoenas were issued to firms that aroused suspicion after an analysis of their loan underwriting volume, number of claims issued, ratio of default, claims compared to the national average, and claims cut early in the life of the mortgage.

Donohue continued that HUD looked at firms that had at least one thousand FHA mortgages, a 200% claims ratio, and were direct endorsement lenders, and that HUD has issued 1033 subpoenas this year.

"The subpoenas demand documents and data relating to failed loans which result in high claims paid out by the FHA mortgage insurance fund. Many of these target loans didn't last but a short time before defaulting, leading to a suspicion a process of loan origination was forged by several possible factors," Donohue said.

FHA Commissioner David Stevens added that, "We are going to be taking additional steps to improve risk management and get the [FHA] capital ratio back to where it needs to be."

"We committed to an announcement that we are going to make those changes by the end of January and we remain committed to that date," he said.

Stevens informed that the loans selected to do these analytics were loans primarily done in 2007, so these subpoenas are not any indication of future loan performance.

Earlier in the day, agents and auditors from HUD served 15 subpoenas to mortgage companies with poor performance records that participate in the governments FHA program.

HUD said the initiative was prompted, in part, by the FHA's Stevens, "who was alarmed by the incidence of claims against the FHA insurance fund by a number of poor performing companies and reached out to the HUD OIG for assistance."

The following are the firms that were issued subpoenas Tuesday.

First Tennessee Bank N.A., Memphis, TN Alethes LLC, Lakeway, TX Security Atlantic Mortgage Co., Edison, NJ Pine State Mortgage Corporation, Atlanta, GA Birmingham Bancorp Mortgage Corporation, West Bloomfield, MI Alacrity Financial Services, LLC, Southlake, TX Assurity Financial Services, LLC, Englewood, CO D and R Mortgage Corporation, Farmington, MI Webster Bank, Cheshire, CT Mac-Clair Mortgage Corporation, Flint, MI Americare Investment Group, Inc., Arlington, TX 1st Advantage Mortgage, Lombard, IL American Sterling Bank, Independence, MO Sterling National Mortgage Company Inc., Great Neck, NY Dell Franklin Financial LLC, Columbia, MD

HUD's Donohue described this as "a message to the whole mortgage industry, we are watching you very carefully."

The Department of Housing and Urban Development Office of Inspector General is statutorily authorized to detect and prevent waste, fraud and abuse, and to promote the effectiveness and efficiency of government operations.

The Federal Housing Administration provides mortgage insurance on loans by FHA-approved lenders throughout the United States and its territories. The FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world.

** Market News International Washington Bureau: 202-371-2121 **