Nutter Home Loans folds amid reverse mortgage lawsuit filed by DOJ

Lender says DOJ lawsuit isn't why it's shutting down

Reverse mortgage lender Nutter Home Loans, aka James B. Nutter & Co., has closed its doors amid a protracted fight with the U.S. Department of Justice. The news was first reported by local outlet the Kansas City Star.

The DOJ filed a suit in late 2020 alleging that reverse mortgage lender Nutter Home Loans forged certifications and used unqualified underwriters to approve Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgage (HECM) loans originated between 2008 and 2010. In September, the trial was delayed to 2024 to allow both parties to gather the necessary documents and information for the case.

Nutter Home Loans maintains that no wrongdoing took place, and said it remains confident it will prevail in the court case. The suit will continue to be litigated even after the closure of the business, Nutter told the newspaper.

“Since the complaint was first filed in September 2020, Nutter has maintained that the Justice Department’s allegation are completely meritless,” said Jim Nutter Jr., president and CEO of Nutter Home Loans. “Moreover, nowhere does the complaint allege that any of Nutter’s borrowers were ineligible or unqualified to receive any loan, nor that any action taken by Nutter hurt any borrower, in any way.”

Anonymous sources who spoke with the Kansas City Star said that the lengthy nature of the upcoming trial, combined with Nutter Jr.’s health issues, is why the company is closing.

The lender ceased originating mortgage loans on Oct. 20, according to the Star. The company, which has an estimated 125 employees, will keep only a small number on hand while the remainder will be laid off, the story said.

The initial complaint by the DOJ was filed in September of 2020 under the purview of both the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the False Claims Act (FCA), after being 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, HUD, and HUD’s Office of Inspector General (OIG).

Nutter Home Loans is considered a pioneer in the reverse mortgage industry due to its quick adoption of the Home Equity Conversion Mortgage (HECM) program after it began in 1989. In its heyday, Nutter serviced about $7 billion a year in mortgages.

Nutter’s origination volume has taken a big dip in recent years. According to mortgage software Modex, Nutter has originated just $102 million in mortgages year-to-date. In 2021, it originated $503 million in mortgages and $590 million in 2020.

These days, just a small percentage of the firm’s originations are reverse mortgages.

RMD reached out to representatives of Nutter Home Loans but did not immediately hear back.

Read the story at the Kansas City Star.

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