Utah-based lenders agree to pay nearly $10M to resolve mortgage lending case - Salt Lake Tribune

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 before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, but instead relies on the efforts of the DEL to verify compliance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, the justice department said.

As part of the settlements, both PRMI and SecurityNational admitted they certified loans for FHA mortgage insurance that did not meet HUD underwriting requirements regarding borrower creditworthiness and eligibility, the justice department said.

“The FHA program provides important economic support for homeownership and community development,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The department has and will continue to ensure that program participants adhere to applicable requirements and will pursue those that knowingly misuse the program for their own gain and to the detriment of homeowners and the public.”

“PRMI obtained HUD insurance by intentionally claiming its loans met HUD’s quality standards while knowing many of its loans did not meet those standards,” said Acting U.S. Attorney Bob Troyer for the District of Colorado said in the news release. “When those loans failed, it was the government who suffered the loss. We will continue our efforts to hold housing lenders accountable for fraudulent conduct.”

“HUD relies on the Direct Endorsement Lenders like SecurityNational to make sure their loans are made only after a rigorous and thorough review,” said U.S. Attorney Paul J. Fishman for the District of New Jersey. “In this case, SecurityNational has admitted it approved loans that it had no business endorsing, potentially damaging a vital FHA program and other potential borrowers.”

PRMI admitted it endorsed loans that were not eligible for FHA mortgage insurance, including loans where:

PRMI failed to document the assets used to qualify the borrower for FHA mortgage insurance and omitted liabilities owed by the borrower from the underwriting analysis;

PRMI failed to document income used to qualify the borrower for FHA mortgage insurance;

PRMI failed to verify the borrower’s earnest money deposit; and

The borrower was delinquent on a second, pre-existing FHA mortgage.

SecurityNational admitted it endorsed loans that were not eligible for FHA mortgage insurance, including loans where:

The borrower was delinquent on federal debt and had an unpaid court-ordered judgment;

The borrower was four months delinquent on the underlying mortgage SecurityNational refinanced into an FHA loan;

The mortgage loan amount exceeded HUD’s loan to value requirements;

SecurityNational failed to document income used to qualify the borrower for FHA mortgage insurance; and

Utah-based lenders agree to pay nearly $10M to resolve mortgage lending case - Salt Lake Tribune