United Shore Financial Services has agreed to pay $48 million to resolve allegations that it violated the False Claims Act, according to the Department of Justice.
United Shore is the parent company of leading wholesaler United Wholesale Mortgage. The Justice Department alleges that United Shore knowingly originated and underwrote mortgages insured by the Federal Housing Administration that didn’t meet FHA guidelines.
“The settlement announced today holds United Shore accountable for its endorsement of ineligible loans for FHA mortgage insurance,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, who heads the DOJ’s Civil Division “Over the past several years, the Civil Division, in collaboration with numerous US Attorney’s offices, HUD and its Office of Inspector General, has diligently worked to hold FHA-approved lenders accountable for actions that deprived homeowners of their homes, wasted taxpayer funds, and contributed to the financial crisis. The settlement announced today is yet another success in this continuing effort.”
“The federal government insures loans on the condition that lenders comply with certain rules to safeguard federal funds,” said US Attorney Barbara L. McQuade. “When lenders breach their duty of due diligence and make risky loans that go bad, taxpayers pay the bill. By holding accountable lenders who fail to comply with underwriting requirements, we hope to send a message to all lenders that they must comply with government standards for federally insured loans.”
United Shore acknowledged in the settlement that it failed to comply with FHA requirements, according to John W. Vaudreuil, US Attorney for the Western District of Wisconsin.
“While USFS deserves credit for acknowledging and resolving its conduct, that conduct not only resulted in substantial losses of public funds, but also put Wisconsin homeowners at risk of losing their homes or ruining their credit,” Vandreuil said. “This large settlement should send a clear message that such conduct will not be tolerated.”
According to the Justice Department, between 2006 and 2011 United Shore failed to comply with certain FHA underwriting and quality control requirements. As part of the settlement, the company admitted that it “improperly pressured” underwriters to approve FHA mortgages, and that its compensation plan used a formula that expressly tied underwriting compensation to the percentage of loans approved by the underwriter and closed by the company. United Shore also falsely certified that direct-endorsement underwriters personally reviewed appraisal reports before the company approved and endorsed mortgages for FHA insurance, according to the Justice Department.
The agency also alleged that the company’s internal quality-control reviews showed “severe problems” with FHA-insured mortgages, but that United Shore “routinely failed to provide any information to senior management regarding its QC findings.”
“As a result of USFS’ conduct and omissions, HUD insured hundreds of loans approved by USFS that were not eligible for FHA mortgage insurance under the Direct Endorsement program, and that HUD would not otherwise have insured,” the Justice Department said in a release. “HUD subsequently incurred substantial losses when it paid insurance claims on those loans.”
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