The government accused the mortgage company of falsely certifying loans for the FHA insurance program
Sierra Pacific Mortgage Company will pay a penalty $3.67 million to resolve allegations that it falsely certified that loans were compliance with FHA mortgage insurance regulations.
Sierra Pacific was a direct-endorsement lender for the FHA. A direct-endorsement lender has the authority to originate, underwrite and endorse mortgages for FHA insurance. If a direct-endorsement lender approves a mortgage for FHA insurance and the loan later defaults, the holder of the loan can submit a claim to the FHA for the losses. The Justice Department alleged that between April 2007 and June 2009, Sierra Pacific knowingly submitted loans to the FHA that didn’t qualify for the program. The DOJ also alleged that Sierra Pacific failed to respond to internal warning signs that its loans were poorly underwritten, and failed to implement a sufficient quality-control program once it became aware of those warning signs.
“When mortgage companies fail to follow lending standards, it harms both taxpayers and borrowers,” said US Attorney McGregor W. Scott. “We will continue to work with HUD/FHA and our law enforcement partners to ensure the integrity of the FHA insurance program.”
“The wrongful actions of (Sierra Pacific) were not minor mistakes or foot faults,” said Paul Compton, general counsel for the Department of Housing and Urban Development. “There is no room at FHA for lenders who knowingly violate the trust placed in them as direct-endorsement lenders.”
“When unscrupulous lenders deliberately ignore HUD guidelines, it undermines the housing market and creates distrust between potential homebuyers and the federal programs designed to assist them,” said Tony Meeks, assistant special agent in charge of HUD’s Office of Inspector General. “Our office is committed to ensuring the FHA insurance program will not be mismanaged, and we are committed to pursuing all acts of fraud, waste and abuse.”
