Fifth Third Bancorp became the latest mortgagee to fall victim to the federal False Claims Act after it agreed recently to an $85 million settlement with the government over alleged failures to self-report defective mortgages to the FHA. The settlement between the Department of Justice and FTB and its banking subsidiary resolves civil fraud claims arising from the bank’s origination of FHA-insured residential mortgages. According to the DOJ, the Ohio-based direct endorsement lender admitted to originating approximately 1,400 home loans it previously certified as FHA-eligible but which later turned out to be materially defective. FTB, however, did not report its discovery to the Department of Housing and Urban Development as required, resulting in millions of dollars in losses to the FHA Mutual Mortgage Insurance Fund. Under the settlement terms approved by ...

The Department of Housing and Urban Development has proposed a rule that would conform its property disposition practices and regulations to industry standards and make the program more effective and efficient. The proposed changes would allow HUD to obtain the best value for its real estate-owned properties, minimize losses to the Mutual Mortgage Insurance Fund, and expand homeownership opportunities. In addition, the proposed rule would prepare the agency for future changes to the FHA single-family property disposition program for REO properties. The proposed rule would clarify HUD’s authority to receive REO properties as well as possess, hold and maintain them throughout the disposition process. A provision in the proposed rule would clarify that various evaluation tools may be used to establish the list price for REO properties but only an approved appraiser in good standing may ...

The FHA has issued guidance on acceptable timetables in every state for completing the foreclosure process as well as for other procedural changes for forward and reverse mortgages. FHA regulations require that, when foreclosure of a defaulted loan becomes necessary, mortgage servicers “must exercise due diligence” in carrying out the foreclosure and in acquiring title to and possession of the property. The updated reasonable-diligence time frames will take effect for all cases in which foreclosure is initiated on or after Jan. 1, 2016. The reasonable diligence period begins with the first legal action required by the jurisdiction to start foreclosure and ends upon the acquisition of a good marketable title and possession of the property. The FHA expects servicers to comply with all federal, state and local laws when prosecuting foreclosures and possessing properties backing ...

The VA loan is a great option for veterans and servicemembers looking to purchase a new home. However, did you know it could also be paired with other home-financing programs to give the borrower a bigger bang for the buck? For instance, many real estate brokers and mortgage lenders are unaware that the VA loan can be used with certain products offered through state housing finance agencies to provide greater benefits to veterans and members of the military. The Colorado Housing and Finance Authority (CHFA) offers a tax credit program that allows VA borrowers to claim a percentage of the annual mortgage interest paid each year as a federal tax credit on their federal income tax returns. “It is not a tax deduction,” said Chad Patterson, a real estate agent with RE/MAX Traditions in Longmont, CO. “This can be a huge asset to the ...

Michaelson, Connor & Boul has reached the end of its term as mortgage compliance manager (MCM) of the Department of Housing and Urban Development. Sept. 30, 2015, was MCB’s last day as mortgage compliance manager, in charge of processing millions of pre- and post-conveyance transactions for HUD. MCB won the contract as HUD’s first national MCM in 2010, when the department reorganized its management and marketing(M&M) programs under a new M&M III. However, even before that, since 1999, MCB had been performing real estate acquisition and disposition services for HUD under the previous M&M programs. As mortgage compliance manager, MCB had a bird’s eye view of every lender’s (and their service provider’s) business practices when performing pre- and post-conveyance activities. As of Aug. 31, 2015, MCB had processed 4,162,550 pre- and post-conveyances. As MCB makes ...

Government Files False Claims Act Suit Against FHA Lenders, “Counseling Fund.” Three federal agencies filed a civil lawsuit against a purported charitable “counseling fund” and five FHA-approved mortgage lenders and their principals for running a mortgage scam that resulted in a huge loss for the FHA. The suit alleges that Rainy Day Foundation, a tax-exempt charitable institution in the District of Columbia, and five New York-based banks defrauded several federally insured banks resulting in millions of dollars of mortgage losses and costing the FHA $5.6 million in paid false claims. According to the complaint, the lenders originated FHA loans, which they later sold to the victimized banks. The loans went into early-payment default (EPD) at twice the average default rate of other lenders. The lenders allegedly conspired with the Rainy Day foundation to conceal their ...

Riding a wave of heavy purchase-mortgage activity, Ginnie Mae issuers produced a record $128.23 billion of single-family mortgage-backed securities during the third quarter of 2015, according to a new Inside FHA/VA Lending ranking and analysis. The third-quarter figure, which includes FHA home-equity conversion mortgage MBS, was up 6.5 percent from the second quarter of this year. The previous record was $125.68 billion, set back in the third quarter of 2009. Loan-level MBS data, which do not include HECMs and have truncated loan amounts, show hefty gains in purchase-mortgage activity that more than offset sharp declines in refinance business. The flow of FHA purchase mortgages jumped 37.7 percent from the second to the third quarter, and VA purchase mortgages were up 37.9 percent over the same period. Meanwhile, refinance volume fell ... [ 2 charts ]

Certain unidentified independent mortgage bankers are in talks with the Department of Housing and Urban Development over alleged False Claims Act violations, according to a top mortgage industry executive. Speaking recently on the Internet radio program “Lykken on Lending,” Dave Stevens, president of the Mortgage Bankers Association and a former FHA commissioner, said the lenders are quietly negotiating and have avoided media attention, so far. On air, Stevens said he and a “certain group of individuals had met with HUD Secretary Julian Castro” to discuss the FCA complaints. The MBA official said the use of the FCA – which allows for treble damages – represents an “extraordinary overreach” by the government that is threatening the overall FHA program. Stevens did not name the lenders are or say how many there are, but he did mention an ...

The Inspector General of the Department of Housing and Urban Development called for civil and administrative actions against loanDepot for allowing ineligible “gifts” on FHA-insured loans.Acting on a referral from HUD’s Quality Assurance Division, the IG focused on FHA loans originated by loanDepot that included downpayment assistance from the Golden State Finance Authority. A review of 75 loans endorsed from Oct. 1, 2013, to Jan. 31, 2015, determined that 62 loans involved gift funds that did not comply with FHA requirements. In addition, the privately held nonbank lender “inappropriately charged borrowers $25,700 in fees that were not customary or reasonable, as well as $46,510 in discount fees that did not represent the purpose of the fee,” the IG said. The IG blamed loanDepot’s overreliance on Golden State’s Platinum Downpayment Assistance Program as well as ...

The majority of higher-priced first-lien loans in 2014 were FHA-insured, according to the latest Home Mortgage Disclosure Act data. Approximately 45 percent of FHA-insured, first-lien purchase mortgages had annual percentage rates in excess of the reporting threshold, similar to the percentage in the latter half of 2013, the Federal Financial Institutions Examination Council noted. Higher-priced loans are those with APRs that exceed the average prime offer rate by at least 1.5 percentage points for first-lien loans and at least 3.5 percentage points for subordinate-lien loans. The data on the incidence of higher-priced lending show that about 8 percent of first-lien purchase loans originated in 2014 have APRs that exceed the loan-price reporting thresholds, up from about 5 percent in 2013, the FFIEC said. The higher APRs for FHA loans were due to a slight increase in ... [ 1 chart ]