First American Mortgage Trust (FAMT) of Brookline reached a settlement with the Federal Housing Administration’s Mortgagee Review Board (MRB) today for failing to fully verify whether borrowers could sustain their mortgage payments prior to refinancing their loans.

Among the alleged violations, the MRB claimed the Brookline mortgage lender refinanced mortgage loans for borrowers with serious credit delinquencies without properly analyzing the households’ ability to manage credit, according to a statement. As part of the settlement, FAMT has agreed to pay $72,500, reimburse FHA for past insurance claims and to indemnify FHA’s insurance fund for any claims to be paid on five mortgages should they default during the next 60 months.

"FHA-approved lenders are obliged to apply our underwriting standards, not only to protect our insurance fund, but to make certain families can sustain their mortgages," said Acting FHA Commissioner Bob Ryan. "Due diligence is at the root of mortgage lending protecting lenders, the FHA and certainly homeowners from the prospect of foreclosure."