Consumer Finance Insights
October 5, 2016

HUD OIG Announces PFCRA Settlement with FHA Lender

On September 29, 2016, the U.S. Department of Housing and Urban Development (HUD) and its Office of Inspector General (HUD OIG) announced a settlement with a mortgage lender relating to two audits of the lender’s Federal Housing Administration (FHA) insured loans. The audits allegedly determined that the lender underwrote FHA-insured loans with prohibited restrictive addenda to the purchase contracts. These purported addenda prevented borrowers from renting or reselling the homes, thus violating FHA guidelines.

In February 2016, HUD filed a complaint relating to these findings under the Program Fraud and Civil Remedies Act of 1986 (PFCRA), 31 U.S.C. §§ 3801-3812.  The complaint alleged that the lender had made false statements in the submission of claims to HUD.  An amended complaint was filed in June 2016.

The mortgage lender agreed to pay HUD $180,000 to resolve the alleged violations concerning, but not limited to, 168 loans that were part of the audit. The settlement explicitly notes that it does not constitute an admission of liability or fault by any party.

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