SunTrust Lender (SunTrust) for $418 million. As part of the settlement, SunTrust admitted that between , it originated and underwrote FHA-insured mortgages that did not meet FHA requirements and were therefore not eligible for FHA mortgage insurance, that it failed to carry out an effective quality control program to identify non-compliant loans and that it failed to self-report to HUD even the defective loans it did identify. SunTrust also admitted that numerous audits and other documents disseminated to its management between 2009 and 2012 described significant flaws and inadequacies in SunTrust’s origination, underwriting, and quality control processes and notified SunTrust management that as many as 50 percent or more of SunTrust’s FHA-insured mortgages did not comply with FHA requirements. For example, a 2010 internal audit stated that SunTrust had identified pervasive weaknesses in many controls that…impair continuity and consistency of operations and management’s ability to generate high-quality loans. Other reports received by SunTrust management described its quality control program as severely flawed and ineffective. These reports also described to management that the volume of problems in the program was excessive, and that the error rates were elevated and at an unacceptable level.
In 2015, Metlife Mortgage brokers (MLHL) agreed to settle alleged False Claims Act violations for $123.5 million. MetLife Bank was aware that a substantial percentage of these loans were not eligible for FHA mortgage insurance based on its own internal quality control findings. According to these findings, between , the portion of MetLife Bank loans containing the most serious category of deficiencies, which MetLife Bank called material/significant, ranged from 25 percent to more than 60 percent. While the overall significant error rate identified by MetLife Bank e time period, MetLife Bank more frequently downgraded FHA loan defects from significant to moderate. In one instance, a quality control employee wrote in an email discussing MetLife Bank’s downgrading practice: Why say Significant when it feels so Good to say MODERATE. Overall, between , MetLife Bank identified 1,097 FHA mortgage loans underwritten by MetLife Bank with a significant finding, but despite an obligation to self-report findings of material violations of FHA requirements, MetLife Bank only self-reported 321 mortgages to HUD.
In the department’s $212.5 million settlement with Earliest Tennessee Lender Federal Relationship (First Tennessee) in 2015, First Tennessee agreed that the quality of its FHA underwriting significantly as its FHA lending increased. Beginning no later than early 2008, First Tennessee became aware that a substantial percentage of its FHA loans were not eligible for FHA mortgage insurance based on its own quality control findings. For example, in , First Tennessee had a significant findings percentage of 47 percent. Despite internally acknowledging that hundreds of its FHA mortgages had material deficiencies, and despite its obligation to self-report findings of material violations of FHA requirements, First Tennessee failed to report even a single deficient mortgage to FHA.
The brand new legal code of one’s Not the case States Operate and you will the FHA investigations express you to definitely a lender that tries to adhere to FHA standards and you can helps make a keen immaterial error, if not serves inside good-faith, won’t be subject to accountability within the Not the case Says Work
The brand new department will stay such enforcement operate with the Not true Says Act, and can will always be guided because of the vocabulary of the work one to prohibits the fresh new entry out-of understanding and you may issue not the case states. On FHA framework, because of this zero bank usually face Not the case States Work administration considering an enthusiastic unknowing mistake otherwise a keen immaterial requirements. However,, meanwhile, the fresh service does not think twice to provide a hobby in which an effective bank or other personal otherwise organization that would defraud the government taxpayer submits untrue comments and you will states at the expense of new federal fisc.
Just like the acquiesced by MLHL, off , MLHL several times official to possess FHA insurance policies mortgage loans one to did not meet HUD underwriting criteria and have been Washington personal funding loans ergo not qualified to receive FHA mortgage insurance policies
The brand new agency have compensated and lead cases in the event the bank knowingly registered financing getting FHA home loan insurance coverage you to definitely contains procedure flaws into the the newest underwriting of the home loan one to rendered the mortgage ineligible having FHA financial insurance. Such as for example question defects which have lead to cases are neglecting to be sure an effective borrower’s employment, property, or credit prior to FHA’s conditions; materially overstating a good borrower’s income, property, otherwise willingness to repay the loan loan; materially understating a borrower’s debts otherwise power to pay-off the loan loans; and you can failing continually to make sure the assets brings enough collateral for the mortgage loan.
