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Mortgage

Reverse mortgage servicer Celink settles lawsuit for $4.25 million

Suit alleges Celink wrongfully collected interest on FHA insurance

Celink settled a federal lawsuit regarding allegations that it violated the False Claims Act in relation to its servicing of reverse mortgage loans. The Michigan-based servicer agreed to shell out $4.25 million to resolve the matter.

The suit alleged that Celink secured interest on insurance payments from the Federal Housing Administration for loans that were ineligible for such payments.

According to the Department of Justice, the loans did not meet the requirements for interest payments because they did not meet deadlines for obtaining a property appraisal, commencing foreclosure proceedings, and/or “exercising reasonable diligence” in completing the foreclosure.

In a release, the DOJ asserted that Celink received additional interest payments it was not entitled to from Nov. 1, 2011, to May 1, 2016.

The claims were resolved by the settlement without a determination of liability.

“This settlement represents our office’s continued commitment to protecting the financial solvency of vital financial programs designed to benefit America’s seniors,” said United States Attorney Chapa Lopez.

“HECM servicers must be held accountable for failing to adhere to FHA requirements that are designed to ensure the continued viability of the HECM program,” Lopez continued. “We are pleased that Celink cooperated with the investigation and agreed to accept financial responsibility for these failures.”

Celink CEO Jason McNamara told HousingWire the company is happy to put the issue to rest.

“Celink cooperated with the government in this matter, and in order to resolve this matter with finality, agreed to a settlement, which does not involve any admission of liability by Celink,” McNamara said. “We are happy to put this matter behind us so that we can remain focused on taking care of our clients and their borrowers.”

Wyatt Achord, acting special agent-in-charge at the Department of Housing and Urban Development’s Office of Inspector General, said the case should be a warning to reverse mortgage servicers.

“This investigation and settlement should serve as a stark reminder of our ongoing efforts to ensure that our mortgage industry partners adhere to mutually agreed upon program rules and business practices which help mitigate financial risk associated with FHA programs,” said Achord. “It is our mission to rigorously pursue cases such as this one to protect the integrity of federal housing programs designed to assist homeownership.” 

This is the latest lawsuit settled between the government and reverse mortgage servicers.

In 2017, Financial Freedom paid $85 million for HECM servicing violations, and in 2015, Reverse Mortgage Solutions paid $29.63 million to settle allegations that it did not comply with FHA’s servicing standards.

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