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FHA Mortgagee Settles for Over $1 Million

A civil fraud lawsuit in New York alleging a mortgagee on government-insured loans failed to follow program rules has been settled for more than $1 million.

Residential Home Funding Corp. was approved by the Federal Housing Administration as a direct endorsement lender from 2006 until 2012.

But the
White Plains, New York-based mortgage banking organization is accused of failing to maintain a compliant quality-control program.

In addition, according to a written statement from Acting United States Attorney for the Southern District of New York Joon H. Kim, the lender approved loans for FHA insurance that failed to meet HUD requirements.

“Notwithstanding these failures, Residential Home continued to fraudulently certify to HUD, each year, that it ‘conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval,’ ” the statement said.

So the Department of Justice filed a complaint against Residential Home Funding in a Manhattan federal court, though it simultaneously agreed to a settlement, according to the statement.

The settlement requires Residential Home to retain an independent compliance consultant to ensure it is compliant with HUD program rules.

The settlement will cost the lender $1.67 million. The amount was determined based on Residential Home’s financial ability to pay.

“We’re pleased that Residential Home Corp. has accepted responsibility for its actions and has agreed to improve its training and quality control program,” HUD Associate General Counsel for Program Enforcement Dane Narode said in the statement.

A stipulation and order of settlement and dismissal was filed Wednesday in federal court.

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