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 Home loans (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 Bank Federal Organization (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.
New legal words of the Incorrect Claims Work and our very own FHA testing describe you to definitely a loan provider one to tries to conform to FHA criteria and tends to make an immaterial error, or otherwise serves in good faith, are not subject to responsibility under the Not the case Says Operate
The brand new agencies will continue these types of administration operate making use of the Incorrect Says Work, and will are still directed because of the words of the operate one to forbids new submitting of knowing and material not true states. On the FHA perspective, this is why zero lender often deal with Not true Claims Work administration based on an unknowing error otherwise an enthusiastic immaterial criteria. But, meanwhile, brand new department cannot think twice to bring an action in which a bank and other private or organization who defraud the government taxpayer submits untrue statements and states at the cost of brand new federal fisc.
Due to the fact recognized by MLHL, out of , MLHL many times specialized to own FHA insurance rates mortgage loans one did not fulfill HUD underwriting criteria and was hence not qualified to receive FHA mortgage insurance rates
This new service features paid and you may delivered instances when the bank knowingly recorded finance for FHA mortgage insurance coverage you to definitely contains material problems in brand new underwriting of one’s financial you to made the borrowed funds ineligible to own FHA financial insurance coverage. Instance point flaws with resulted in times become failing to guarantee an excellent borrower’s a position, possessions, or credit prior to FHA’s conditions; materially overstating a great borrower’s income, assets, or willingness to settle the borrowed funds mortgage; materially understating an excellent borrower’s obligations or power to pay the borrowed funds loans; and you can failing continually to ensure the assets brings sufficient equity with the real estate loan.