A major mortgage company based in Franklin, TN will be paying a stiff fine to the United States, on allegations of engaging in lending practices that did not meet federal standards
Federal authorities have compelled the Franklin American Mortgage Company out of Tennessee to pay $70 million to the government as a penalty for violating the False Claims Act.
Authorities said that the firm knowingly originated and underwrote mortgage loans insured by the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD).
The December 2 settlement stated that between 2006 and 2012, Franklin American certified loans that did not meet the underwriting requirements set by the HUD. The company was also found to have employed unqualified junior underwriters (who were subject to exceedingly high quotas, under pain of disciplinary action) and insured hundreds of non-eligible loans.
Prosecutors said that the penalty serves as a warning to other lenders that poor lending practices will not be tolerated
“Franklin promised that its loans met HUD’s quality standards in order to obtain HUD insurance, but ignored widespread, systemic defects in those loans. This case is the latest step in our ongoing effort to hold lenders accountable for fraudulent conduct that wreaked havoc on our housing market,” U.S. Attorney John F. Walsh (District of Colorado) told Examiner.com.
In recent years, authorities have started taking steps to bring lenders to task for inadequate and improper underwriting of insured mortgages – an industry practice that had led to significant losses for the federal government.
Authorities said that the firm knowingly originated and underwrote mortgage loans insured by the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD).
The December 2 settlement stated that between 2006 and 2012, Franklin American certified loans that did not meet the underwriting requirements set by the HUD. The company was also found to have employed unqualified junior underwriters (who were subject to exceedingly high quotas, under pain of disciplinary action) and insured hundreds of non-eligible loans.
Prosecutors said that the penalty serves as a warning to other lenders that poor lending practices will not be tolerated
“Franklin promised that its loans met HUD’s quality standards in order to obtain HUD insurance, but ignored widespread, systemic defects in those loans. This case is the latest step in our ongoing effort to hold lenders accountable for fraudulent conduct that wreaked havoc on our housing market,” U.S. Attorney John F. Walsh (District of Colorado) told Examiner.com.
In recent years, authorities have started taking steps to bring lenders to task for inadequate and improper underwriting of insured mortgages – an industry practice that had led to significant losses for the federal government.
