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First Tennessee Bank subject of federal probe

Jeff Keeling • Jan 25, 2010 at 12:00 AM

First Tennessee Bank got some unsettling news last week as it prepared to release its fourth-quarter (and full year) 2009 financial results: it and 14 other mortgage lenders are the subject of a federal government probe into the default rates on FHA-backed mortgages originated since 2007.

The Office of Inspector General at the Department of Housing and Urban Development announced it had subpoenaed 15 mortgage companies “demanding documents and data related to failed loans which resulted in claims paid out by the FHA mortgage insurance fund,” HUD said in a news release.

First Tennessee has said it will cooperate fully with the probe, which HUD said was prompted by FHA Commissioner David Stevens “alarm” at 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 bank already has suffered heavy financial losses as a result of mortgage businesses around the country that it started buying up in the late 1990s, and now those businesses — which began exhibiting trouble with the housing downturn and were sold to MetLife in 2008 — could end up being the source of further woes for the bank’s parent company, First Horizon National.

Read the full report at the Johnson City Press Web site.

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