Mortgage

DOJ investigating FHA lending practices of Lennar subsidiary Eagle Home Mortgage

Homebuilder discloses investigation in SEC filing

Eagle Home Mortgage, the mortgage lending subsidiary of Lennar, could find itself on a list that includes Wells Fargo, Walter Investment, United Shore Financial Services, PHH, and many other lenders that were sanctioned by the government for underwriting mortgages that did not meet Federal Housing Administration standards.

In recent years, the Department of Justice under President Barack Obama accused a number of lenders of violating the False Claims Act by knowingly originating and underwriting mortgages that did not meet with FHA standards.

But Department of Housing and Urban Development Secretary Ben Carson recently told Congress, and later the Mortgage Bankers Association, that the Trump administration is considering ending the use of the False Claims Act to extract settlements from FHA lenders.

Despite Carson’s proclamations, the DOJ is apparently investigating Eagle Home Mortgage and its FHA lending process.

Lennar revealed the investigation in a Securities and Exchange Commission filing.

“Our mortgage subsidiary has been subpoenaed by the United States Department of Justice regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years,” Lennar said in the SEC filing.

According to Lennar, the company has provided information about the loans in question and its process for originating FHA loans to the DOJ, and said that communications with the DOJ are “ongoing.”

Lennar also notes that at this point, the DOJ has not made any claim of damages or discussed any penalties.

According to the SEC filing, Lennar originated approximately 31,600 residential mortgages totaling $9 billion in 2017, and 33,500 residential mortgages totaling $9.3 billion during 2016.

Lennar does not break down its lending into segments in the SEC filing, so it’s unclear how much of its lending business is FHA loans.

The company has made moves in recent months to expand its lending business.

Last year, Eagle Home Mortgage rolled out a new mortgage program that will help homebuyers pay off their student debt. The program offers borrowers as much as $13,000 that can be used to pay off student loan debt, but only if they buy a new home from Lennar.

Lennar is also set to merge with fellow homebuilder CalAtlantic Group, in a deal that will see Lennar acquire CalAtlantic for approximately $9.3 billion.

That deal will create the nation’s largest homebuilder.

(h/t USA Today)

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