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By Al Yoon

NEW YORK, Dec 1 (Reuters) - Lend America, a home mortgage company under fire for allegedly violating government underwriting guidelines, on Tuesday abruptly ceased originations and operations.

The brief announcement on Lend America's website came a day after the Federal Housing Administration canceled its approval for the lender to make loans under the U.S. agency's home mortgage guarantee program.

The FHA, citing abuses that included submitting false documents and making loans that did not meet requirements, imposed civil penalties of $512,500 against Ideal Mortgage Bankers, which does business as Lend America.

The agency's action came six weeks after U.S. Attorney for the Eastern District of New York Benton Campbell sought an injunction against Lend America and Michael Ashley, its executive vice president and chief business strategist. Campbell alleged the company falsely certified that borrowers of more than $14 million met requirements for FHA guarantees.

Demand for FHA-backed loans, the business in which Lend America was active, has grown significantly in volume since the onset of the housing crisis.

Origination of FHA-backed loans has surged in the past two years as the credit crunch and housing crisis shuttered many private funding sources and left borrowers scrambling for help in refinancing loans. To maintain volume, lenders focused their business toward the FHA for loans that do not meet the stricter funding requirements of Fannie Mae and Freddie Mac.

Lend America is the latest lender to face scrutiny by the Department of Housing and Urban Development, which is undertaking a larger enforcement effort against lenders that abuse their rights to make FHA-backed loans. In August, the FHA suspended Taylor Bean & Whitaker after finding the lender misrepresented an audit that raised concerns of fraud.

Taylor Bean was the nation's 12th-largest mortgage lender from January to June. Lend America is smaller, but was the 22nd largest originator of FHA loans based on originations in the two years through Sept. 30.

The FHA is also fighting to limit its risk as mortgage losses have caused its capital reserves to plummet.

The U.S. attorney's complaint said Ashley violated regulations laws and an industry ban throughout his career, including falsifying documents to meet funding guidelines of Fannie Mae and Freddie Mac. Ashley plead guilty in 1993 to conspiracy to commit wire fraud in connection with instances of mortgage fraud, according to the complaint.

Spokesmen for the U.S. attorney, the FHA and Lend America declined to comment.

Lend America employs about 600 people in Melville, New York, about 50 miles from New York City. It occupies the former home of American Home Mortgage, a lender whose rapid decline in 2007 ended in bankruptcy.

Callers to Lend America offices heard a recorded message telling customers it was stopping operations and that it would honor obligations to past and current borrowers.

Several borrowers, from Ohio to California, who claimed they recently refinanced with Lend America, said the company failed to pay off their existing mortgages after they received a new loan. (Editing by Dan Grebler) ((albert.yoon@thomsonreuters.com; +1 646-223-6347; Reuters Messaging: albert.yoon.reuters.com@reuters.net))