Mortgage Daily

Published On: October 19, 2018

A whistleblower will receive nearly $2 million for her role in a lawsuit alleging Universal American Mortgage Company LLC approved loans for government insurance that didn’t qualify.

As a mortgagee with direct endorsement
authority from the Federal Housing Administration, Miami-based Universal American was empowered to approve FHA loans itself.

The lender, a subsidiary of home builder Lennar Corp., is required to follow FHA program rules to ensure proper underwriting, certification and quality control to prevent and correct underwriting deficiencies.

But a lawsuit filed under the False Claims Act by former employee
Kat Nguyen-Seligman alleges that the company submitted loans that didn’t qualify for FHA from 2006 until 2011.

In addition, according to an announcement
Friday from the Department of Justice — which intervened in the action — underwriters were improperly incentivized, and it knowingly failed to perform quality control reviews. The alleged actions violated Department of Housing and Urban Development requirements and contributed to the submission of defective loans.

“Under the direct endorsement lender program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance,” the Justice Department said. “Direct endorsement lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices.”

The Justice Department said that Universal American has agreed to settle the
lawsuit for $13.2 million — including $1.98 million to be received by Nguyen-Seligman.

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