In a "rare" step, the federal government has taken over the portfolio of loans that belong to Melville-based Lend America, which closed Dec. 1 after authorities filed a civil fraud suit and pulled its license to make federally insured mortgages.
The Government National Mortgage Association, known as Ginnie Mae, has started overseeing the transfer of 6,700 loans totaling $1.3 billion from Cenlar, Lend America's New Jersey-based loan servicer, to a Virginia-based one. Since the lender closed a day after the license revocation, state and federal investigators have pored over Lend America's accounts as refinance borrowers complain that their old loans were never paid off.
"We made the decision that it was in the best interest of the government and taxpayers to take that portfolio and place it with one of our own" servicers, said Mary Kinney, Ginnie Mae executive vice president.
Ginnie Mae, which guarantees investors timely payment on pools of government-insured loans, last year gave Lend America approval to bundle and sell such loans in the investment market. This "bond issuer" status was also revoked last month, and in such cases Ginnie Mae takes over the lender's portfolio. Lend America had a company interested in buying its portfolio, but federal officials, who must approve the choice, said they did not believe the potential buyer could handle so many loans.
Kinney said Ginnie Mae has a "vested interest" in ensuring the investigation goes quickly, partly because it continues to pay investors on Lend America loans that may not exist or whose borrowers refuse to pay due to disputes with the lender.
"I hope Ginnie Mae is at least able to communicate with the borrowers," said Joseph Maniscalco, a Wantagh attorney representing a title insurance company that sued former client Lend America over 66 disputed refinance cases.
Kinney said federal officials would encourage the servicers to help borrowers sort through the confusion.
In coming months, that could spell relief for borrowers such as Barbara Ray Zonn of Georgia, who closed on her $138,000 refinance Oct. 8. She said she paid Lend America $1,099 for November, then learned her CitiMortgage loan was still open, forcing her to make two months' of late payments. Like others, she said Lend America's servicer, Cenlar, has threatened to foreclose if she does not make her Lend America payments. Cenlar did not return calls for comment.
"I have cried and cried over this," Zonn said. "When somebody threatens to take away the life that you've built for 61 years, it's very upsetting."