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This time to the tune of over $92 million in damages!
As the result of a joint action brought by the US Attorney for the Southern District of NY, the US Attorney for the Southern District of Texas, Julian Castro, as HUD Secretary, and HUD’s Inspector General, Allied Home Mortgage Capital Corp., and Allied Home Mortgage Corp. (collectively “Allied”), plus Allied’s President and CEO, Jim C. Hodge, were found to have violated the certifications made in connection with the origination of FHA-insured mortgages. Not a good move.
According to the findings, Allied lied to HUD when certifying their FHA-insured loans to fraudulently reap profits under the FHA programs. In addition, to make things worse, Allied operated a dysfunctional QC program.
Allied employed a small number of unqualified people to monitor the loan performance of its over 600 branch offices. To compound things, Mr. Hodge personally directed his employees to falsify the QC reports to make it appear that everything was going well, and all audits were done according to FHA requirements. You wonder why mortgage lenders get a bad name.
It all finally caught up to him when a jury unanimously found him and Allied guilty of and liable for violations of the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). It just doesn’t pay to circumvent the rules.
HUD IG, David Montoya, reiterated that this is at the heart of their mission to weed out the bad actors. This verdict should serve as notice to all lenders that such actions and activities are not beyond the reach of federal law enforcement and will not be tolerated. This is a direct warning to all lenders doing FHA business. You better make sure you are playing by the rules, or else!
Once again we see the importance of a complete, accurate, and timely QC program. It is not something that should be taken lightly. Even with some expected easing of enforcement under the new administration, violators will be hunted down and prosecuted by the HUD IG, in conjunction with the various US States Attorneys.
- Do you have a compliant QC program?
- Are you confident that your loans are being originated and reviewed in accordance with all governing guidelines and requirements?
- Are you prepared for HUD, CFPB, IG or other regulatory audits?
You better be. You just don’t know when one might come.
In case you weren’t having enough trouble sleeping, you should note that this action was the result of a whistleblower notification.
