Hometown Lenders faces cease and desist, $1M in unpaid taxes

Hometown Lenders’ financial wherewithal has once more come into question after documents revealed it hasn’t paid taxes to the government and has stopped making pass-through payments on Federal Housing Administration loans in the state of Washington.

As a result, the lender has been slapped with a cease and desist order from a Washington regulatory agency, temporarily barring Hometown from doing business in the state. The Internal Revenue Service has also issued a notice of a federal tax lien in the amount of almost $1 million,  according to a recent filing.

The order shuttering Hometown’s lending activity was issued by the Department of Institutions of the State of Washington on Oct. 17. Per the state regulator, the mortgage lender has been collecting FHA mortgage insurance premiums from loans and not remitting the upfront payments within 10 calendar days of the mortgage closing, as is required by law.

The regulator counted at least nine instances this year wherein Hometown did not remit payments in a timely manner, or failed to pay the upfront MIP it received from borrowers located in Washington state. These actions represent a “serious risk of injury to the public” and in at least five instances the practice “negatively impacted the Washington State Housing Finance Commission,” the regulator wrote. 

It is asking for the mortgage shop to immediately “remediate all harm done to agencies, borrowers, holders, lenders and investors” and for the company to provide detailed accounting of its assets and liabilities.

According to an industry stakeholder, who agreed to speak anonymously, instances of lenders failing to pay upfront MIP is a rampant issue for mortgage companies struggling to stay afloat and “is done out of desperation.”

The second issue facing Hometown is at least $942,797 in quarterly tax returns owed to the IRS, though sources claim this number is substantially higher. Over $600,000 is owed from 2020 and close to $300,000 is owed for the tax period ending June 30, 2023. The IRS manager in charge of the Hometown case did not respond to a request for comment. 

Billy Taylor, Hometown Lenders founder and CEO, did not respond to a request for comment.

Despite the state of Washington taking action against Hometown, former employees of the company say more could be done.

“The real shame is that several people have reported to the Department of Housing and Urban Development, Department of Labor, the Federal Bureau of Investigation, Fannie Mae, Freddie Mac and the Federal Deposit Insurance Corporation stating that they have documentation of this kind of behavior and none of the agencies have followed up,” a former Hometown employee said.

The lender’s trials and tribulations have come to the forefront as many mortgage players have struggled to find their footing in a harsh lending environment where interest rates are high and origination volume has come to a standstill. Unlike the bountiful years of 2020 and 2021, 2023 has seen meager home buying activity. Mortgage application volume dropped for the fourth time in five weeks, for the weekly period ending Oct. 20.

To survive during this time, Hometown announced it would wind down its retail operations and would instead broker loans, though questions remain whether this will help it stay afloat.

Prior to this change, both current and former employees alleged the lender stopped paying for rent, utilities and health insurance. Unpaid bills, ranging from leases to invoices from appraisal management companies and vendor service providers have piled up since mid-2022, causing branch managers to step up and pay for some bills out of pocket without getting reimbursed, they said.

Some of these claims have developed into lawsuits. There are at least four suits with similar allegations pending against the mortgage shop. All four have been filed by former branch managers.

One of the lawsuits, filed by a top-performing branch in the U.S. District Court for the Northern District of Illinois, alleges that Hometown withheld the amount due for child support from an employee’s paycheck but failed to send the payment to the State of Illinois. This allegedly resulted in the employee almost losing his visitation privileges.