ABNÂ AMRO Mortgage Group has agreed to the largest FHA settlement ever.
The Chicago-based mortgage unit will pay the U.S. Government $16.85 million this week and will not submit hundreds of defaulted loans to the Department of Housing and Urban Development for FHA claims, according to a joint announcement today from HUD, HUD’s Office of Inspector General, the Justice Department and the Office of the Comptroller of the Currency.
The value of the settlement, including the savings to the FHA insurance fund, is $41 million, the government said.
The settlement stems from charges ABNÂ AMRO falsified “documents in tens of thousands of loans insured by the Federal Housing Administration,” the statement said.
HUD reportedly discovered in 2003 underwriting deficiencies and improper conduct by an ABNÂ AMRO employee.
The company launched an internal investigation upon HUD’s notification and found several of its employees had falsely certified that more than 28,000 loans had been reviewed by underwriters prior to FHA endorsement — even though they had not, according to the government. ABN AMRO terminated several senior-level employees responsible for the improper conduct, and reassigned others.
“There was no harm or loss to borrowers or business partners,” ABN AMRO said in a written statement. “All loans were underwritten by HUD-authorized underwriters; however, the final certification process was not completed properly.”
The 28,000 loans in question are performing consistently with other loans originated during the same period and with FHAÂ loans originated by other lenders, ABNÂ AMRO said in its statement.
The episode has reportedly led to a reorganization of the entire ABN AMRO Mortgage Group, which said it “is committed to an FHA loan program that is in full compliance with all of the applicable requirements. The company remains steadfast in monitoring its improved controls, and does not and will not tolerate misconduct.”
But the company, which the government said fully cooperated in its investigation, has not admitted to any wrongdoing, according to a copy of the agreement — which was reportedly reached in order to avoid litigation. Thomas Goldstein, Chairman and CEO, executed the agreement on behalf of ABNÂ AMROÂ Mortgage Group Inc.
“As much as we intend to aggressively expand the FHA program … we will not do so at the expense of the financial soundness, integrity or reputation of the Federal Housing Administration,” said Federal Housing Commissioner Brian Montgomery in the statement.
“It sends the unmistakable message to the mortgage industry as a whole that the government will not tolerate such blatant violations of FHA’s underwriting requirements and other improper conduct by lenders that threaten the integrity of the FHA program and we will hold lenders responsible for such activities,” HUD Inspector General Kenneth Donahue Sr. said in the announcement.
