SunTrust Bank (SunTrust) for $418 million. As part of the payment, 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 First 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.
This new statutory words of the False Says Work and all of our FHA investigations express you to definitely a lender one tries to follow FHA criteria and you will can make a keen immaterial mistake, if not serves in the good-faith, will not be at the mercy of accountability under the Untrue Says Work
New institution continues these enforcement operate with the Not true Says Operate, and certainly will will always be directed of the vocabulary of operate that forbids new entry from knowing and you can procedure incorrect states. About FHA framework, as a result zero financial have a tendency to face Incorrect States Operate administration according to an unknowing error or an immaterial requirement. But, at the same time, the fresh agencies cannot think twice to offer an activity in which an excellent financial or any other individual otherwise entity who defraud new federal taxpayer submits untrue statements and says at the expense of the newest federal fisc.
Given that recognized by MLHL, out-of , MLHL many times specialized to own FHA insurance coverage mortgages you to definitely did not satisfy HUD underwriting criteria and you may had been thus perhaps not entitled to FHA financial insurance coverage
The latest agencies has paid and you will put instances in the event that lender consciously recorded money for FHA mortgage insurance coverage you to contained question defects within the new underwriting of your own mortgage you to rendered the loan ineligible for FHA mortgage insurance coverage. Such situation problems which have contributed to cases is failing continually to verify an excellent borrower’s a career, possessions, otherwise borrowing from the bank in accordance with FHA’s requirements; materially overstating a beneficial borrower’s income, assets, or willingness to settle the loan financing; materially understating good borrower’s debts otherwise capacity to pay-off the mortgage loans; and you will failing woefully to guarantee the property brings sufficient guarantee for the real estate loan.