Several large banks and mortgage companies are accused of cheating military veterans and taxpayers out of millions of dollars by hiding illegal fees in VA refinance transactions and of deliberately misleading the government to obtain guarantees for the refinanced loans. Three law firms – Butler Wooten & Fryhofer and Wilbanks & Bridges in Atlanta and Phillips & Cohen in Washington, D.C. – have teamed up to pursue the “qui tam” or whistleblower lawsuit on behalf of two mortgage brokers and the U.S. government. The brokers, Victor Bibby and Brian Donnelly, brought the lawsuit under the False Claims Act, a federal law that goes back to the Civil War when it was used to ...

The Department of Veterans Affairs has issued guidance explaining the confusion in the last couple of weeks caused by conflicting VA regulations and legislation. The latest guidance from the VA, Circular 26-11-16, updates the method for calculating funding fees based on a provision in H.R. 2646, the Veterans Health Facilities Capital Improvement Act of 2011, which President Obama signed into law on Oct. 5. H.R. 2646, which sets funding for the construction of various VA medical facilities, also provides for higher funding fees for VA loans, contrary to funding fee changes announced by the VA on Sept. 8. Previous VA guidance notes ...

The House of Representatives has passed legislation that would give surviving spouses of fully disabled veterans access to VA home loans. The bill, H.R. 120, the Disabled Veterans’ Surviving Spouses Home Loans Act, is part of H.R. 2433, the Veterans Opportunity to Work Act, which the House overwhelmingly approved on Oct. 12 by a vote of 418 to 6. H.R. 2433 contains six pieces of veteran legislation designed to address veteran unemployment. Introduced by Rep. Virginia Foxx, R-NC, H.R. 120 aims to allay concerns of veterans with permanent and total disabilities about where their surviving spouses would live should the veteran die of causes unrelated to their military service. Under current law, a surviving spouse may qualify for a VA home loan only if the service member’s death is determined to be related to service disabilities. Otherwise, the surviving spouse qualifies only for ...

The Department of Housing and Urban Development is a step closer to leveling the playing field for FHA lenders but there is more to be done, according to a recent analysis by K&L Gates. Recent changes announced by HUD are a good start to setting right the unintended adverse effects of last year’s changes to FHA’s lender-approval requirements, but HUD needs to do more to implement these changes fully, concludes the analysis. Authors Krista Cooley, Holly Spencer Bunting and Kathryn Baugher, all attorneys with K&L Gates, said future pronouncements from HUD should provide additional guidance on how to address the inequities between third-party originators and FHA-approved lenders with regards to ...

The Department of Housing and Urban Development has suspended a former president of Lend America from doing any business with the agency following his admission that he engaged in a mortgage fraud scheme against the FHA in 2009. Michael Primeau, the former executive, had pled guilty to charges he directed employees of Lend America, a former FHA-approved lender, to divert mortgage funds intended to pay off borrowers’ first mortgages at refinance closings in order to pay company-operating expenses. Two years ago, HUD and the U.S. Attorney for the Eastern District of New York filed a civil complaint against Ideal Mortgage Bankers, doing business as Lend America, in federal district court. The complaint sought ...

President Obama has announced Carol Galante as his pick for Assistant Secretary for Housing and FHA Commissioner at the Department of Housing and Urban Development. Galante has occupied the two posts in an acting capacity since July 12, when she replaced Robert Ryan. Ryan temporarily assumed both jobs after former HUD Assistant Secretary for Housing and FHA Commissioner David Stevens left HUD at the end of March 2011 to join the Mortgage Bankers Association as its new president and CEO. Prior to her current post, Galante served as HUD deputy assistant secretary for multifamily programs. In addition, Galante, a licensed real estate broker, has been a leader of major administration initiatives, including ...

The Senate voted this week to reinstate the higher conforming loan limit that expired at the end of September, heeding calls by the real estate and mortgage industries. On a vote of 60-38, lawmakers passed an amendment to the FY2012 funding bill, S. 1596, for the Department of Housing and Urban Development, which, among other things, would raise the maximum loan amount that can be guaranteed by FHA, Fannie Mae and Freddie Mac. Introduced by Sen. Robert Menendez, D-NJ, the amendment restores the 125 percent median home price formula used to calculate the temporary higher loan limits in effect prior to Oct. 1, which was up to $729,750 in certain high-cost areas of the country and lower in other jurisdictions. After Oct. 1, the new loan limit calculation was ...

The departure of MetLife Bank, a division of insurer MetLife Inc., from the mortgage business will leave a gap in the FHA market that should not be hard to fill. The bank recently announced its intention to sell its mortgage business due to uncertainty in the marketplace and the rising cost of compliance in an excessively burdensome regulatory environment. It is getting too difficult to compete and be profitable under these conditions, the bank said in a statement. MetLife Bank’s mortgage-related woes reflected on its FHA origination volume and market share, both of which have been shrinking over the last couple of quarters. MetLife ranked fourth among ...

Endorsements of Home Equity Conversion Mortgage loans during the first six months of 2011 rose 0.4 percent above the rate of endorsements from a year earlier but fell 20.2 percent on a quarterly basis, according to Inside FHA Lending’s analysis of HECM activity during the first six months of 2011. At the mid-year mark, HECM endorsements totaled $9.5 billion, with third-party originators sponsored by FHA-approved lenders accounting for 40.4 percent of all HECM originations. Non-FHA-approved mortgage brokers are no longer allowed to originate HECMs under a policy change last year aimed at reducing FHA losses and risks to the FHA Mutual Mortgage Insurance Fund. HECM endorsements totaled ... [includes two (2) data charts]

Last week, GMAC Mortgage announced implementation of the Responsible Homeowner Reward Program to provide monetary incentives to underwater VA loan borrowers who continue making payments on their loans. The RHRP was designed by the Loan Value Group as a way to address negative equity without necessitating additional documents or new underwriting. Homeowners build up their reward each month for a fixed period of time, so long as they are current. The size of the reward is consistent with the negative equity and severity of the loan. If the borrowers meet all of the payment milestones on time, GMAC Mortgage will...