FHA Settlement for BBT

From Jan. 1, 2006, until Sept. 30, 2014, BB&T is accused of falsely certifying residential loans insured by the Federal Housing Administration.

The alleged actions on FHA loans by the
Winston-Salem, North Carolina-based financial institution were in violation of the False Claims Act.

An announcement Thursday from the Department of Justice said that BB&T
certified loans that didn’t meet FHA requirements.

In addition to falling short on FHA originations and underwriting requirements, it allegedly also didn’t meet FHA’s quality-control requirements. Although FHA originations surged, there was no increase in QC staffing.

“BB&T significantly increased its loan volume between 2006 and 2009 — more than doubling all loan originations, while increasing the number of FHA insured loans six fold,” the Justice Department stated. “This increase in volume was accompanied by an increase in the number of loans internally rated ‘serious-marketability’ by BB&T’s quality control department — the most significant quality control defect rating and a defect that rendered a loan ineligible for FHA insurance.”

The government claims that the share of loans with the poor rating exceeded 30 percent between 2007 and 2011 and was as much as half in 2010 and 2011 — though BB&T still endorsed many of the loans for FHA insurance and sought payment from the Department of Housing and Urban Development if they defaulted.

In all, hundreds of ineligible loans were certified for FHA mortgage insurance, according to the government.

Although the Justice Department claims management was alerted to the deficiencies by internal QC reports and recommendations were proposed to improve FHA underwriting and training — the recommendations weren’t implemented until 2014.

In addition, BB&T allegedly failed to self-report the deficiencies until 2013.