Mortgage Lender Pays $2.4M to Settle FHA Loan Violations

Mortgage Lender Pays $2.4M to Settle FHA Loan ViolationsPhoto bySteph RupponUnsplash

James B. Nutter & Company, a former mortgage lender based in Kansas City, Missouri, has agreed to pay $2.4 million to settle allegations that it violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Department of Justice (DOJ) announced today.

The company was accused of knowingly underwriting Home Equity Conversion Mortgages (HECM) insured by the Department of Housing and Urban Development (HUD)’s Federal Housing Administration (FHA) that did not meet program eligibility requirements.

“The HECM program helps support our nation’s senior citizens by providing an additional source of funds to supplement their income,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division.

“Together with our partners at HUD, we are committed to protecting the financial integrity of this critical program and to pursuing those who seek to abuse it.”

Lenders participating in the FHA’s Home Equity Conversion Mortgage (HECM) program are authorized to underwrite mortgages without prior government review for compliance with the agency’s underwriting and origination requirements, according to the DOJ.

If an FHA-insured loan defaults, the lender can recover certain losses from the United States. In return, lenders commit to adhering to FHA rules to ensure that only eligible mortgages are insured by the government.

“The U.S. Attorney’s Office is dedicated to seeking recovery from mortgage lenders who take advantage of FHA programs and ignore essential program requirements,” said U.S. Attorney Teresa A. Moore for the Western District of Missouri.

“The integrity and resources of those important programs must not be put at risk by mortgage lenders who put their own financial interests first.”

The settlement resolves a 2020 lawsuit alleging James B. Nutter & Company violated FHA underwriting rules by allowing inexperienced staff to underwrite loans and submitting FHA-insured loans with falsified or premature underwriter signatures.

Notably, The claims resolved by the settlement are allegations only. There has been no determination of liability.