HUD OIG Audit Finds Florida-Based Lender in Violation of FHA’s Short Sale Program

The Office of the Inspector General for the U.S. Department of Housing and Urban Development (HUD OIG) has recommended that Jacksonville, Florida-based EverBank Servicing Lender reimburse HUD more than $1.5 million for violating the terms of the Federal Housing Administration's (FHA) Preforeclosure Sale Program.

HUD OIG issued the findings of a recently conducted audit of EverBank's Preforeclosure Sale Program in a 57-page report earlier in the week. In the report, HUD OIG states the audit revealed that EverBank "did not properly determine that mortgagors were eligible to participate in FHA’s Preforeclosure Sale Program in accordance with HUD requirements."

The audit revealed that EverBank failed to:

• Properly evaluate mortgagors' financial state, which includes determining whether the default was due to an adverse or unavoidable financial situation;
• Determine whether or not the mortgagors could pay the FHA loan;
• Substantiate whether the cause of default was related to the mortgagors' need to vacate the property.

"This condition occurred because EverBank’s interpretation of the program requirements that it adopted to qualify the mortgagors for the program was not in accordance with HUD requirements," the audit said. "As a result, the FHA insurance fund paid nearly $1.6 million in improper claims for 11 preforeclosure sales, including lender and mortgagors incentives."

The audit made two recommendations for EverBank: reimburse HUD for the 11 ineligible claims totaling $1,567,518; and implement policies and procedures in accordance with HUD requirements in order to properly determine whether mortgagors are eligible for the FHA Preforeclosure Sale Program.

According to HUD OIG, EverBank was chosen for the audit because it "had the highest Florida foreclosure sale claims of all servicing lenders located in Florida." With more than $12.9 million paid from 2011 to 2013, more than 50 percent of EverBank's Florida Federal Housing Administration claims came from preforeclosure sales.