Hometown Lenders’ state license suspensions mount

A handful of state housing regulators moved to revoke Hometown Lenders’ license in recent weeks. Overwhelmingly, the notices filed accuse the lender of not paying mortgage insurance premiums on what amounts to hundreds of government-insured loans.

In total, there are at least 300 Federal Housing Administration loans originated by Hometown with unpaid MIP, according to filings by regulators in the states of Montana, Missouri, Maine and Alabama. 

Regulators from Alabama, California, Kentucky, Maine, Missouri, Montana and Washington have all issued notifications that the mortgage shop’s license to originate loans is revoked or suspended, based on the grounds of questionable and harmful practices. 

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

A filing by Alabama’s housing regulator, which includes testimony from Chris Fiorello, a former chief operation officer at Hometown, and Tabatha Russell, a former post closing manager at Hometown, provides a glimpse into what was unfolding at the mortgage shop for the past year.

Fiorello disclosed that as of July 2023, Hometown had 95 purchased loans with unpaid MIPs totaling almost $400,000 and 217 un-purchased loans with unpaid MIP totaling almost $1 million. 

Russell, in her testimony, added she noticed funding issues as early as October 2022 when she was told to stop funding MIP “because she was causing the bank account to be overdrawn,” documents said.

For some time, the former post closing manager claims she was given a small amount of money to pay the MIP, but never to fully fund what was owed. She allegedly brought this issue up to Taylor, who promised this would no longer be an issue, but it continued to be.

In another filing, Montana’s housing regulator claims Hometown “acted as an unlicensed mortgage servicer…by taking at least one mortgage payment from a Montana borrower.”

The Montana borrower paid an upfront mortgage insurance premium to the lender at closing on Aug. 4, but as of Nov. 21, Hometown has not disbursed the MIP collected to the FHA to purchase mortgage insurance.

“A mortgage lender that accepts even one borrower payment must be licensed as a mortgage servicer in Montana,” the Montana filing said. “Respondent is not now and has never been licensed as a mortgage servicer in Montana.”

Regulators in Illinois have not revoked Hometown’s license as of Dec. 1, but documents shared with National Mortgage News show that at least two Illinois borrowers have also been impacted by similar practices. Overall, questions remain regarding what Hometown was doing with the MIP payments after collecting them from borrowers.

The Alabama-based company, which recently transitioned to a broker model, faces an onslaught of other issues, such as accusations from former employees and branch managers that the lender stopped paying for rent, utilities, health insurance and funding their 401k accounts.

Flagstar Bank is also suing the mortgage company for $21 million for “wrongful conduct” of defaulting on a warehouse line.

Hometown has breached its “loan and security agreements and Taylor has defaulted under his guaranty” by failing to pay timely curtailments and holding pledged mortgage loans in the warehouse facility beyond the permissible period, a suit filed by the bank said.