Financial Freedom, a division of OneWest Bank agreed to a settlement of over $89 million on Tuesday, resolving allegations from the Department of Justice that the accusing the company of violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 in connection with its participation in a federally insured Home Equity Conversion Mortgages or "reverse mortgage" program.
“The Department of Justice is committed to ensuring that those who participate in federal mortgage insurance programs comply with requirements essential to the success of its programs,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Among these requirements are the deadlines imposed by the Federal Housing Administration on those who service government insured mortgages. Those deadlines are designed to protect the government’s collateral and stop the unnecessary loss of government funds and resources.”
Reverse mortgage loans allow homeowners aged 62 and older to borrow money against the equity they have in their homes. The Federal Housing administration protects lenders from loss from reverse mortgages by providing mortgage insurance which means when the home is sold or vacant for over 12 months, or upon the death of the homeowner, a loan becomes due and payable and the lender is repaid the amount of the loan.
The United states had alleged that Financial Freedom had not properly disclosed on the insurance claims forms it filed with the FHA that the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings. Despite this, had sought to obtain insurance payments from insurance.
This led to the mortgagees serviced by Financial Freedom allegedly obtaining additional interest which the Department of Justice states that they were not entitled to receive.
“Today’s settlement agreement resolves allegations that this lender failed to comply with FHA servicing requirements and sought to receive financial gains that it was not legally entitled to,” said HUD Inspector General David A. Montoya. “These actions today demonstrate our continued commitment to address and halt business practices that pose a serious risk to the FHA program and the public’s trust in HUD administered programs.”