Universal American Mortgage Company, LLC Agrees to Pay to Settle for Failing to Follow FHA Rules

Stephanie Abbott —  October 23, 2018 — Leave a comment

Universal American Mortgage Company, LLC (UAMC) has agreed to pay the United States $13.2 million to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with Federal Housing Administration (FHA) mortgage insurance requirements in connection with certain mortgages.  UAMC is a mortgage lender headquartered in Miami, Florida, doing business across the country, including in the Western District of Washington.

The United States alleged that between January 1, 2006, and December 31, 2011, UAMC knowingly submitted loans for FHA insurance that did not qualify.  The United States further alleged that UAMC improperly incentivized underwriters and knowingly failed to perform quality control reviews, which violated HUD requirements and contributed to UAMC’s submission of defective loans.

During the period covered by the settlement, UAMC participated as a direct endorsement lender (DEL) in the U.S Department of Housing and Urban Development’s (HUD’s) FHA insurance program.  A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices.

The announcement was made by U.S. Attorney Annette L. Hayes.

Mortgage lenders may not ignore material FHA requirements designed to reduce the risk that borrowers will be unable to afford their homes and federal funds will be wasted,” said Assistant Attorney General Joseph H. Hunt for the Justice Department’s Civil Division.  “We will hold accountable entities that knowingly fail to follow important federal program requirements.”

“In a quest for profits, mortgage companies have ignored important lending standards” said U.S. Attorney for the Western District of Washington, Annette L. Hayes.  “Not only does this harm the borrowers leaving them over their heads in debt and underwater on their mortgages, it harms taxpayers because the mortgages are backed by government insurance.  This settlement should serve as a warning to other lenders to diligently follow the rules.

United States Attorney Joseph Harrington for the Eastern District of Washington said, “FHA mortgages are vital to first-time homebuyers and to families whose credit and assets were damaged by the 2008 economic crisis.  FHA underwriting and other requirements are critical to safeguarding the integrity of the public money used to operate this important program.  We will continue to work with our law enforcement partners to ensure that mortgage lenders and others who profit from this program, while ignoring its rules, will be held accountable.

One of our principle responsibilities is to protect and ensure the integrity of federal housing programs for the benefit of all Americans,” said Jeremy M. Kirkland, Acting Deputy Inspector General, U.S. Department of Housing and Urban Development, Office of Inspector General.  “This settlement demonstrates our resolve and should signal to irresponsible lenders that this conduct will not be tolerated.

FHA depends upon the lenders we do business with to apply our standards and to truthfully certify that they’ve done so,” said David Woll, HUD’s Deputy General Counsel for Enforcement.  “Working with our federal partners, HUD will enforce these lending standards so we can protect families from preventable foreclosure and to protect FHA from unnecessary losses.

The settlement resolves allegations originally brought by Kat Nguyen-Seligman, a former employee of a related UAMC entity, in a lawsuit filed under the whistleblower provisions of the False Claims Act, which allows private parties to bring suit on behalf of the federal government and to share in any recovery.  The whistleblower will receive $1,980,000 as her share of the federal government’s recovery in this case.

This matter was handled on behalf of the government by the Justice Department’s Civil Division, the U.S. Attorney’s Offices for the Eastern District of Washington and Western District of Washington, the Department of Housing and Urban Development, and the Department of Housing and Urban Development’s Office of the Inspector General.  case is captioned United States ex rel. Kat Nguyen-Selgiman v. Lennar Corporation, Universal American Mortgage Company, LLC, and Eagle Home Mortgage of California, Inc., 14-cv-1435 (W.D. Wash.).  The claims resolved by this settlement are allegations only, and there has been no admission of liability.

The settlement agreement is being handled by Assistant United States Attorney Kayla Stahman.

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Stephanie Abbott

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