WASHINGTON, D.C. (October 25, 2018) – (RealEstateRama) — Universal American Mortgage Company LLC (UAMC) has agreed to pay the United States $13.2 million to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with Federal Housing Administration (FHA) mortgage insurance requirements in connection with certain loans, the Department of Justice announced today. UAMC is a mortgage lender headquartered in Miami, Florida.
“Mortgage lenders may not ignore material FHA requirements designed to reduce the risk that borrowers will be unable to afford their homes and federal funds will be wasted,” said Assistant Attorney General Joseph H. Hunt for the Department of Justice’s Civil Division. “We will hold accountable entities that knowingly fail to follow important federal program requirements.”
“FHA mortgages are vital to first-time homebuyers and to families whose credit and assets were damaged by the 2008 economic crisis,” said U.S. Attorney Joseph H. Harrington for the Eastern District of Washington. “FHA underwriting and other requirements are critical to safeguarding the integrity of the public money used to operate this important program. We will continue to work with our law enforcement partners to ensure that mortgage lenders and others who profit from this program, while ignoring its rules, will be held accountable.”
“In a quest for profits, mortgage companies have ignored important lending standards” said U.S. Attorney Annette L. Hayes for the Western District of Washington. “Not only does this harm the borrowers leaving them over their heads in debt and underwater on their mortgages, it harms taxpayers because the mortgages are backed by government insurance. This settlement should serve as a warning to other lenders to diligently follow the rules.”
During the time period covered by the settlement, UAMC participated as a direct endorsement lender (DEL) in the U.S Department of Housing and Urban Development’s (HUD’s) FHA insurance program. A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices.
The United States alleged that between January 1, 2006, and December 31, 2011, UAMC knowingly submitted loans for FHA insurance that did not qualify. The United States further alleged that UAMC improperly incentivized underwriters and knowingly failed to perform quality control reviews, which violated HUD requirements and contributed to UAMC’s submission of defective loans.
“One of our principle responsibilities is to protect and ensure the integrity of federal housing programs for the benefit of all Americans,” said Jeremy M. Kirkland, Acting Deputy Inspector General, U.S. Department of Housing and Urban Development, Office of Inspector General. “This settlement demonstrates our resolve and should signal to irresponsible lenders that this conduct will not be tolerated.”
“FHA depends upon the lenders we do business with to apply our standards and to truthfully certify that they’ve done so,” said David Woll, HUD’s Deputy General Counsel for Enforcement. “Working with our federal partners, HUD will enforce these lending standards so we can protect families from preventable foreclosure and to protect FHA from unnecessary losses.”
The allegations resolved by this settlement include a whistleblower lawsuit filed under the False Claims Act by a former employee of a related UAMC entity, Kat Nguyen-Seligman. Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery. Ms. Nguyen-Seligman will receive $1,980,000 from the settlement.
The settlement was the result of a joint investigation conducted by HUD, HUD’s Office of Inspector General, the Civil Division and the U.S. Attorneys’ Offices for the Eastern and Western Districts of Washington. The lawsuit is captioned United States ex rel. Kat Nguyen-Seligman v. Lennar Corporation, Universal American Mortgage Company, LLC, and Eagle Home Mortgage of California, Inc., 14-cv-1435 (W.D. Wash.). The claims asserted against UAMC are allegations only, and there has been no determination of liability.