Recent circuit court rulings may bolster FHA lenders’ defense against the government’s heavy use of the False Claims Act in FHA lending cases, according to industry attorneys. In the years following the financial crisis, the Department of Justice and the relators bar have used the FCA aggressively to target banks and nonbank mortgage lenders for losses incurred by FHA due to poor underwriting and false certifications. The DOJ and the Department of Housing and Urban Development have recovered billions of dollars through settlements with various mortgage lenders and servicers, using increasingly creative theories of liability to hold them responsible for FHA losses. This week, the DOJ filed a lawsuit in federal court in Washington, DC, accusing Guild Mortgage of improper origination and underwriting of FHA-insured mortgage loans from January 2006 through December 2011. As in ...

There are important details in the recent M&T Bank settlement with the Department of Justice and in this week’s announced filing of a lawsuit against Guild Mortgage that could help lenders avoid a potential false claims lawsuit, according to industry observers. The government’s complaints against the two FHA lenders were brought under the False Claims Act, which penalizes acts that intend to defraud the government and taxpayers. The government has been using this powerful statutory tool in the mortgage arena in its attempt to recover FHA losses arising from fraud and noncompliance with agency requirements. As in previous FCA cases against FHA lenders, both M&T Bank and Guild Mortgage were accused of false certification, lax underwriting, poor quality control, failure to review early payment defaults, and failure to self-report deficient loans and remediate problems in a timely manner. In addition, the ...

There is widespread frustration among FHA appraisers regarding the scope of service they are now required to provide under the Department of Housing and Urban Development’s newly revised single-family policy handbook. While the new handbook brought more clarity to FHA’s lending and underwriting policies, certain changes to property-valuation rules appear to have added home inspection to appraisal work – and appraisers and real estate professionals are not pleased. Many of the so-called changes in the handbook already existed, but one change that stood out is the word “must,” said Martin Wagar, a certified broker/appraiser and president of Wagar & Associates. Appraisers are now required to know the basic appliances that come with the home, how to operate them, and to identify and report any deficiency that may affect their “contributory value” to the property, said Wagar at a ...

Trade groups representing lenders, homebuilders and appraisers have asked Congress to hold a hearing this year on the future of appraisal regulation.In a joint letter, five industry groups urged the Senate Committee on Banking, Housing and Urban Affairs to reevaluate oversight of the appraisal industry and the current federal regulatory structure for real estate appraisal.The committee last held an appraisal oversight hearing in 2004. Federal appraisal regulations have been untouched since the enactment of the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989, the trade groups noted. In addition, the groups asked that both federal and state responsibilities be reassessed to see if they continue to serve consumers and market participants well, as well as promote competition in the marketplace. In addition to federal regulation, states regulate appraisers as well. The groups want to know from Congress whether federal oversight of appraisers is still necessary.

The Department of Veterans Affairs has issued new guidance and some servicing reminders in connection with mobile-home foreclosures, consent judgments, servicer transfers, liquidation appraisal fees and others.VA servicers must specifically refer to the mobile home in foreclosure declaration documents to ensure that both the home and the land are properly foreclosed, the VA said. Many states require two separate foreclosure procedures for every transaction – one to foreclose the interest on the land and the other to foreclose on the title of the mobile home. The VA said foreclosure on the title of the mobile home may have to be filed with state’s Department of Motor Vehicles (DMV). When a VA loan on a home on wheels is referred to foreclosure, the servicer must inform the foreclosing attorney that it is a mobile home and whether a DMV filing is required. The VA will reconvey the mobile home to the ...

The Department of Veterans Affairs has clarified the type of documents lenders would need to provide clear and marketable title for conveyed properties to the VA in all states and U.S. territories. Under VA rules, each conveyance or transfer of real property to the VA shall be acceptable if “the holder covenants or warrants against the acts of the holder and those claiming under the holder (e.g. by special warranty deed).” In addition, the conveyance would be acceptable if it entitles the VA Secretary to such title as is or if it is acceptable to prudent lenders, informed buyers, title companies and attorneys, generally in the community in which the property is located. The VA said its determination of clear and marketable title depends on state statutory requirements. As a general requirement, documents for proper conveyance of clear and marketable title to the VA include the ...

HUD Sends Final Condominium Rule to OMB for Clearance. The Department of Housing and Urban Development has sent a final rule to the Office of Management and Budget that would make it easier for borrowers to obtain FHA financing for certified condominium units. Once issued, the final rule will replace temporary guidance which HUD issued in November last year to ease FHA’s condo approval process. The move is aimed at increasing affordable housing options for first-time and low-income homebuyers. The final rule is expected to reflect measures in the interim guidance, including modification of the requirements for condo project recertification, revised calculation of FHA’s required ownership-occupancy percentage, and expansion of eligible condo-project insurance coverages. IG Scrutinizes HUD Oversight of SFHAs’ Downpayment Assistance Programs. Residential lenders that rely on ...

Is it time to take another look at GSE servicing fees? A topic is reborn...

Another week, and another lender sued by DOJ...

The heavy role of Fannie Mae, Freddie Mac and Ginnie Mae in the post-crisis mortgage market has brought lower rates and considerable liquidity to the mortgage business, but industry leaders question whether private capital can meet the growing need to finance nonbank servicing portfolios and the eventual pullback of the Federal Reserve. “We wouldn’t have the same price we have now without the government being there; its programs provide a 2 to 3 percent discount,” said Stan Middleman, CEO of Freedom Mortgage Corp., during a panel session at the Mortgage Bankers Association’s secondary market conference this week. “They are the whole enchilada. If you took them out, we’d have nothing.” The government-sponsored enterprises are...