Troy company admits fault over mortgage violations
A Troy-based mortgage company has reached a $48 million settlement with the federal government in response to allegations that it approved federally insured mortgages that did not meet certain requirements, the Justice Department announced Thursday.
United Shore Financial Services LLC agreed to the deal after it was accused of violating the False Claims Act by “knowingly originating and underwriting” loans that did not meet requirements to be insured by the U.S. Department of Housing and Urban Development’s Federal Housing Administration, officials said. As part of the settlement, the company admitted to some wrongdoing, officials said.
“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, head of the Justice Department’s Civil Division in a statement Thursday. “Over the past several years, the Civil Division, in collaboration with numerous U.S. Attorneys’ 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.”
Representatives for United Shore Financial Services LLC did not immediately return a call seeking comment.
According to the Department of Justice, between Jan. 1, 2006 and Dec. 31, 2011, United Shore Financial Services did not comply with certain FHA requirements.
As a direct endorsement lender in the FHA insurance program, United Shore Financial Services could originate, underwrite and endorse mortgages for FHA insurance. If a loan defaults, the loan holder can submit an insurance claim to HUD for the losses.
According to the Department of Justice, as part of the settlement, United Shore Financial Services admitted that it wrongly pressured underwriters to approve FHA mortgages. It admitted it tied the underwriter’s compensation to the percentage of loans that United Shore Financial Services closed that were approved by that underwriter.
United Shore Financial Services also admitted it falsely certified that direct endorsement underwriters personally reviewed appraisal reports when they had not.
“The federal government insures loans on the condition that lenders comply with certain rules to safeguard federal funds,” said U.S. Attorney Barbara McQuade for the Eastern District of Michigan in a statement. “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.”