Infringement Allegations Brought Against a Mortgage Lender by the DoJ

Nutter Home Loans is facing allegations from the Department of Justice regarding improprieties in mortgage loans insured by the Federal Housing Administration.

Complaint filed under Financial Institutions Reform, Recovery and Enforcement Act 1989 and False Claims Act relates to home equity conversion mortgages, like Nutter Home Loans charges settled with Department of Housing and Urban Development in 2014.

The most recent complaint alleges that the company used false certifications and hired “unqualified” underwriters to help create HECMs, a type of Federal Housing Administration-insured loan that allows borrowers age 62 and older to withdraw some of the equity in their home to use as cash. , or for other purposes.

“This complaint sends a clear message that we will not tolerate fraud against programs designed to financially assist our nation’s seniors,” Acting U.S. Attorney Michael R. Sherwin for the District of Columbia said in a press release. from the DoJ about the case.

Nutter Home Loans and its outside counsel “strongly dispute both the factual accuracy and the legal merits of the allegations,” according to Edward T. Kang, a partner in the Washington office of Alston & Bird LLP, which is defending the company against the complaint.

The allegations against the company, formerly known as James B. Nutter & Co., reflect a dispute over “alleged technical violations and process errors” that occurred between 2008 and 2010 when “HUD guidelines were far from clear and consistent,” Kang said in an email.

“The company complied with then-applicable HUD guidelines as they reasonably understood them. The Justice Department’s belated allegations in this case are an attempt to rewrite the guidelines 10 years after the fact,” it said. he adds.

Based on this, Kang called “unsubstantiated” allegations that the company submitted false statements about FHA-insured loans to HUD for reimbursement.

Several False Claims Act enforcement actions have followed the housing boom and bust cycle that led to the Great Recession and the trend has reduced some lenders’ interest in the FHA market.

HUD officials have continued to accuse mortgage companies of violations of the False Claims Act from time to time, but they are also clarifying compliance guidelines in an effort to reduce such actions and encourage participation. at the FHA market.

The Department of Housing and Urban Development and its Inspector General participated in the investigation of the DoJ complaint.

“Lenders who willfully ignore FHA requirements for HECM loans expose the program to significant financial losses that threaten the future availability of this important program for seniors,” said Rae Oliver Davis, Inspector General of the Department of Housing and Urban Development. “This complaint is evidence that we will relentlessly investigate allegations of abuse of the HECM program by FHA lenders.”

It is unclear whether the most recent complaint relates to the allegations settled in 2014 or not. The previous allegations related to a breach of underwriting due diligence that resulted in circumstances where the same borrower underwrote more than one HECM.

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