The Office of Inspector General of the United States Department of Housing and Urban Development has released a report alleging that EverBank violated the policies of the Federal Housing Administration’s Preforeclosure Sale Program.
According to the report from the HUD-OIG, EverBank improperly determined whether borrowers were eligible to participate in the FHA’s preforeclosure sale program and as a result of those failings, the FHA insurance fund paid approximately $1.57 million in improper claims.
HUD-OIG said that it audited EverBank’s preforeclosure sale program because “it had the highest Florida preforeclosure sale claims of all servicing lenders located in Florida and more than 50% of its Florida FHA claims were from preforeclosure sales with more than $12.9 million paid from 2011 through 2013.”
HUD-OIG said that its objective in the investigation was to determine whether EverBank had gone through the proper steps before a property was placed into the preforeclosure sale program.
“EverBank did not ensure that the mortgagors’ default on the FHA-insured mortgages was due to an adverse and unavoidable financial situation,” the HUD-OIG report stated. “Also, EverBank did not conduct a thorough and independent verification of the mortgagors’ income, claimed expenses and personal resources to properly determine if they had the ability to pay their mortgage payments. Lastly, EverBank did not substantiate that mortgagors’ need to vacate the FHA-insured property was due to the cause of the default.”
HUD-OIG said that these issues were caused by EverBank’s incorrect interpretation of the HUD requirements for the preforeclosure sale program.
“EverBank did not properly determine that mortgagors were eligible to participate in the program for 11 of the 17 claim files reviewed totaling nearly $1.6 million,” the HUD-OIG report said.
According to the HUD-OIG report, EverBank did not have documentation to support the borrowers hardship claims used as a reason for the default for 11 claims. “In 6 claims, the mortgagors’ hardship letters stated that they were in a default due to a reduction in income,” the report said.
“However, EverBank did not have documentation to support an income reduction, or unemployment claims. In other 5 claims, the mortgagors’ stated they were in default due to increased expenses, no longer could afford or maintain the property, and wanted to relocate to another state.”
According to the HUD-OIG report, the borrowers’ files did not contain sufficient documentation to substantiate those claims.
The report also found that EverBank did not adequately assess borrowers’ personal resources before offering the preforeclosure sale option.
“In three of the four claims, the mortgagors purchased or acquired another home within 1 to 2 months before defaulting on their FHA-insured mortgages,” the report stated.
“Thus, the mortgagors had the resources to purchase more than one property. These mortgagors had an address listed on their credit reports or bank statements that differed from the FHA-insured property address. Two of the mortgagors’ credit reports showed that they had a second mortgage with the initial payment occurring the month of or 1 month before the mortgagors defaulted on their FHA-insured mortgages.”
HUD-OIG found that EverBank did not perform its due diligence and “failed to recognize the information from the mortgagors’ credit reports or bank statements as a potential issue.”
HUD-OIG recommends that HUD require EverBank to repay $1,567,518 it received from the FHA insurance fund for the improper claims.
HUD-OIG also recommends that EverBank is required to develop and implement policies and procedures in accordance with HUD requirements to properly determine mortgagor eligibility for the program.