The company allegedly approved ineligible loans for FHA insurance and submitted false certifications
Residential Home Funding has agreed to pay nearly $1.7 million to settle a civil mortgage fraud lawsuit, according to the acting US attorney for the Southern District of New York.
The settlement stems from the company’s participation in the Federal Housing Administration’s Direct Endorsement Lender Program from 2006 through 2012. Under the program, lenders were required by the Department of Housing and Urban Development (HUD) to follow program rules, including requirements related to underwriting and the maintenance of a compliant quality control program.
The government had alleged in a complaint that Residential Home Funding failed to comply with the basic requirements of the control program. The company was also alleged to have routinely approved loans for FHA insurance that were ineligible under HUD’s underwriting requirements. Despite these failures, Residential Home Funding submitted false loan certifications to HUD claiming that it conformed to all regulations, the government alleged.
Under the settlement, the company admitted and accepted responsibility for failing to conform to HUD and FHA rules, endorsing ineligible loans for FHA mortgage insurance, and submitting false loan-level certifications.
As part of the settlement, which was approved by US District Judge Jed Rakoff, Residential Home Funding also agreed to retain an independent compliance consultant to ensure compliance with FHA and HUD rules applicable to the program.
“We are committed to holding lenders accountable when they recklessly approve loans for FHA insurance and then fail to live up to their promises to HUD,” Acting US Attorney Joon Kim said. “With this settlement, Residential Home accepts responsibility for its conduct and will pay $1.67 million.”
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The settlement stems from the company’s participation in the Federal Housing Administration’s Direct Endorsement Lender Program from 2006 through 2012. Under the program, lenders were required by the Department of Housing and Urban Development (HUD) to follow program rules, including requirements related to underwriting and the maintenance of a compliant quality control program.
The government had alleged in a complaint that Residential Home Funding failed to comply with the basic requirements of the control program. The company was also alleged to have routinely approved loans for FHA insurance that were ineligible under HUD’s underwriting requirements. Despite these failures, Residential Home Funding submitted false loan certifications to HUD claiming that it conformed to all regulations, the government alleged.
Under the settlement, the company admitted and accepted responsibility for failing to conform to HUD and FHA rules, endorsing ineligible loans for FHA mortgage insurance, and submitting false loan-level certifications.
As part of the settlement, which was approved by US District Judge Jed Rakoff, Residential Home Funding also agreed to retain an independent compliance consultant to ensure compliance with FHA and HUD rules applicable to the program.
“We are committed to holding lenders accountable when they recklessly approve loans for FHA insurance and then fail to live up to their promises to HUD,” Acting US Attorney Joon Kim said. “With this settlement, Residential Home accepts responsibility for its conduct and will pay $1.67 million.”
Related stories:
Shift to purchase transactions pushes critical defect rate increase in Q1
Allied Home Mortgage companies to pay $296.3M for FHA fraud scheme