Source: United States Department of Justice Criminal Division
James B. Nutter & Company, a former mortgage lender located in Kansas City, Missouri, has agreed to pay $2.4 million to resolve allegations that it violated the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 by 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.”
The FHA offers numerous mortgage insurance programs intended to help build and sustain strong communities across America. The HECM program is a reverse mortgage program specifically for senior homeowners aged 62 and older. The program allows seniors to access the equity in their residences, and thereby age in place in their family home, through a mortgage agreement with a lender that is insured against loss by the FHA.
Lenders who participate in the FHA’s HECM program are authorized to underwrite mortgages without first having the government review the loans for compliance with the agency’s underwriting and origination requirements. If an FHA-insured loan defaults, the holder of the loan can then recover from the United States for certain losses. Lenders commit to following FHA rules to ensure that only eligible mortgages are insured by the government.
The settlement announced today resolves the United States’ allegations in a lawsuit filed in 2020 that James B. Nutter & Company knowingly violated FHA underwriting requirements when it allowed inexperienced temporary staff to underwrite FHA-insured loans, and submitted loans for FHA insurance with underwriter signatures that were falsified and/or affixed before all the documentation the underwriter should have reviewed was complete.
“This case sought to redress serious violations of FHA requirements that posed a risk to the HECM program,” said HUD General Counsel Damon Smith. “HUD will continue to protect the integrity of this important mortgage program that serves the interests of our nation’s senior citizens.”
“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.”
“Our office continues its diligent pursuit of mortgage originators that do not play by the rules,” said U.S. Attorney Matthew Graves for the District of Columbia. “If a lender is asking the government to insure its loans, the government expects that lender to employ qualified underwriters to ensure the loans present acceptable credit risks and are supported by sound appraisals of the homes used to secure them.”
“This case and the resulting $2.4 million settlement demonstrate the HUD Office of Inspector General’s commitment to holding lenders accountable when they commit fraud against FHA mortgage programs designed to provide financial assistance to senior homeowners,” said Inspector General Rae Oliver Davis of HUD. “No one is above the law. Our office will continue to work with our partners at the Justice Department to investigate mortgage lenders who jeopardize the integrity of FHA mortgage programs.”
The investigation, litigation and settlement were the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorneys’ Offices for the Western District of Missouri and the District of Columbia, HUD and HUD’s Office of Inspector General.
Trial Attorneys Christopher Reimer, Kelly Phipps, Yifan Wang and Wilma Metcalf of the Commercial Litigation Branch and Assistant U.S. Attorney Cindi Woolery for the Western District of Missouri and Assistant U.S. Attorneys Brian Hudak and Benton Peterson for the District of Columbia handled the matter. The litigation resolved by the settlement was captioned United States v. James B. Nutter & Co., Case No. 4:20-cv-874-RK (WDMO).
The claims resolved by the settlement are allegations only. There has been no determination of liability.