Mortgage Lender and CEO Agree to Settle to Resolve Allegations of False Insurance Claims
The settlement resolves allegations that First American, at Polack's direction, ignored FHA's due diligence requirements and falsely certified that First American loans qualified for FHA insurance when they did not. The settlement also resolves allegations that Polack falsely certified to FHA that First American complied with quality control requirements and failed to report known loan defects.
"This settlement is another example of the government's efforts to hold mortgage lenders and individuals accountable for fraudulent underwriting of government-insured mortgages," said
"This settlement agreement resolves allegations that
"We will not tolerate the reckless disregard for FHA's underwriting standards," said
"This settlement is the latest example of our continued work of holding FHA Direct Endorsement Lenders accountable for adhering to strict underwriting standards," said
First American and Polack participated as a direct endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite and approve mortgage loans 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. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance; to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices; and to self-report any deficient loans identified by their quality control program.
As part of the settlement, First American and Polack admitted that on certain occasions between 2005 and 2011, First American did not conduct the due diligence required by FHA, and as a result, some First American loans did not meet FHA's quality standards and were ineligible for FHA insurance. Nevertheless, First American underwriters, supervised by Polack, certified those loans for FHA insurance. When those loans defaulted, FHA paid insurance claims on loans that never should have been FHA insured. In addition, First American, at times, did not conduct post-closing loan audits, even though Polack certified annually to FHA that First American had complied with FHA underwriting requirements. When First American began conducting audits on closed loans, First American and Polack did not report to FHA any serious issues identified by the audits.
The settlement took into consideration First American's and Polack's financial circumstances and recent improvements to First American's business practices.
This matter was investigated by the U.S. Department of Housing and
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News