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Politics & MoneyMortgage

DOJ files complaint against lender for alleged use of unqualified underwriters and forgery

Lender's legal team dispute both the "factual accuracy" and "legal merits" of the allegations

In a complaint announced last week, the Department of Justice alleges that in order to significantly increase its loan production, Nutter Home Loans used unqualified underwriters lacking the requirements established by HUD to review and approve HECMs that Nutter ultimately insured with the FHA. The complaint also alleged the lender of forging signatures of qualified underwriters to make it appear that a qualified underwriter had approved the loan.

When reached for comment, Edward T. Kang, a partner in the Washington D.C. office of Alston & Bird LLP, who is defending the company in this action, said the Justice Department’s claims are devoid of reliable facts.

“These unsubstantiated allegations are inconsistent with our core values and culture. The company has maintained a close working relationship with HUD for decades and was one of a select few lenders asked by HUD to participate in underwriting the first Home Equity Conversion Mortgage in the 1980s,” Kang said.

Kang attributed the actions, at best, as a “dispute over alleged technical violations and process errors related to the underwriting of HECM’s” between 2008 and 2010.

The HECM program is a reverse mortgage program specifically for senior homeowners age 62 and older. The program allows seniors to access equity in their residence so they can age in place in their family home through a mortgage agreement with a lender that is insured against loss by the FHA.

“Not only do the allegations relate solely to conduct that occurred over a decade ago, but the complaint also fails to mention that during this period, HUD’s guidelines were far from clear and consistent,” Kane said. “The company complied with HUD’s then-applicable guidelines as they reasonably understood them. The Justice Department’s belated allegations in this case are an attempt to rewrite the guidelines 10 years after the fact.”

Recent actions by the Consumer Financial Protection Bureau against six mortgage companies they say targeted veterans with false or deceptive ads only underscores the risk lenders and servicers face for potential past misdeeds.

In a statement released by the DOJ on the Nutter case, acting assistant general Jeffery Bosset Clark of the departments Civil Division noted that the department was “committed to holding accountable those who violate the bedrock requirements of this important program.”

Nutter’s legal team strongly disputed both the “factual accuracy” and “legal merits” of the allegations that were investigated by the Commercial Litigation Branch of the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the District of Columbia, the Department of Housing and Urban Development and HUD’s Office of Inspector General.

“We are confident that when the relevant facts and law are presented to a neutral factfinder, the company will prevail,” Kane said.

The claims asserted against the defendant are allegations only and there has been no determination of liability, according to the release.

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