Although new HUD Secretary Ben Carson announced that FHA might pull back on False Claims Act actions DOJ just claimed another victim. IBERIABANK Corp, IBERAIBANK, and IBERIABANK Mortgage (collectively IBERIA) were recently fined $11.7 million.
As the old story goes, during a lending period between January 2005 and December 2014, IBERIA falsely certified loans to be eligible for FHA mortgage insurance. Additionally, as the result of an FHA review in 2010, it was learned that IBERIA was paying incentives to their underwriters. That’s an FHA no-no.
According to the findings, IBERIA violated HUD policies by:
- Paying incentives to DE Underwriters
- Not performing timely QC reviews
- Failing to self-report material violations
- Having inadequate internal processes
- Falsely certifying loans for FHA insurance.
Initially, the allegations were brought under a whistleblower suit filed by two former IBERIA employees. These whistleblowers will receive about $2.3 million in compensation. More incentive for employees to come forward when they believe their employer is doing something wrong.
According to Jeremy Kirkland, the Acting Deputy Inspector General, “This settlement demonstrates HUD OIG’s commitment to work with our partners, under the False Claims Act, to combat fraud against the Government. Today’s settlement should serve as a cautionary tale that we will continue to aggressively utilize it in pursuit of those that seek to undermine federal housing programs.”
Doesn’t appear that DOJ will be backing off these actions anytime soon.
Again, a major player is brought down by their own employees. As it’s difficult for any lender to know exactly what all their employees are doing, it’s important to have the proper policies and procedures in place required for the adequate handling of all loans.
Once policies are documented and in place, lenders need the internal controls to monitor activity to ensure that things are being done according to requirements. Trust but verify, that must be the mantra.
Some things to consider:
- Are you susceptible to a DOJ action?
- Do you have written policies and procedures to guide employees in proper loan handling?
- Are all your employees adequately trained and aware of these policies?
- Do you conduct timely and accurate quality control reviews?
- Are defects reported to senior management, with action plans and follow for correction?
Do you follow all the rules to ensure the origination of quality, compliant loans? If not, you might find that your employees, who are well aware of your shortcomings, may decide to cash in for a nice payday, at your expense.
It’s not only the DOJ or FHA you need to worry about. Don’t leave things to chance. Monitor your loans and activities carefully. Do what you know, but know what you do. You can’t afford the consequences.