National City Mortgage Inc., headquartered in Miamsiburg, Ohio, has agreed to pay the U.S. $4.6 million to settle allegations arising under the False Claims Act concerning 58 federally insured loans for mortgages submitted to the Department of Housing and Urban Development (HUD).
According to HUD, National City has ‘direct endorsement’ authority to underwrite HUD-insured mortgage loans and submit them to HUD for insurance endorsement. Direct endorsement is a mechanism that allows a pre-approved lender to loan a low- or moderate-income borrower money for a mortgage and protects that lender against loss in case of default.
HUD regulations, however, require that the lender make certain certifications to the Federal Housing Administration (FHA) when it is submitting loans for insurance coverage more than 60 days from the loan closing, referred to as ‘late endorsement loans.’ One such certification and requirement is that the loan payment is not more than 30 days past due when submitted for FHA insurance coverage. The government alleges that National City improperly submitted 58 late endorsement loans for FHA insurance coverage that were not current, in violation of FHA regulations.
‘HUD's vital mortgage insurance programs assist lenders that make the American dream of homeownership accessible to more people, but lenders must follow HUD's rules and be held accountable if they knowingly submit loans that are not eligible for insurance,’ says Gregory G. Katsas, acting assistant attorney general for the Justice Department's civil division.
Source: U.S. Department of Justice