5 million. Reverse mortgage lenders are federally insured and regulated entities who offer home financing for elderly citizens that allow them to access the equity in their homes without selling the property or taking on monthly payments.
The U.S. Department of Justice investigation revealed that the lender had allegedly made false statements and documents to the U.S. Department of Housing and Urban Development (HUD) in order to receive government insurance on certain Home Equity Conversion Mortgages (HECMs). The lender allegedly submitted false documents that misrepresented the amount of HECM-related fees it was charging borrowers, and failed to disclose to HUD that those fees were actually higher than what was indicated.
The settlement resolves civil fraud claims that the lender violated the False Claims Act and knowingly submitted false documents and statements to HUD. According to the complaint, the lender misrepresented the amount of fees it charged the HECM borrowers and failed to report its true fees on HECM documents and forms to HUD. The lender also allegedly failed to properly document the consent it received from homeowners to pay certain fees.
In a statement, Principal Deputy Assistant Attorney General Jody Hunt of the Justice Department’s Civil Division said, “The Department is committed to ensuring that lenders comply with the rules when seeking government insurance on reverse mortgages. This settlement serves as an important reminder that lenders must take their obligations seriously or they will face consequences.”
Under the terms of the settlement, the lender is required to pay the government $2.5 million and admitted to certain facts alleged in the complaint. Additionally, the lender is required to comply with HUD’s regulations until Aug. 31, 2024.
The False Claims Act, established in 1863, protects the federal government against fraud and abuse. It allows those who know of violations, such as whistleblowers, to sue on behalf of the government for damages. The law has been used successfully to recover money lost to fraud and other wrongful conduct.
The U.S. Department of Justice's investigation of this case illustrates the use of the False Claims Act to protect the government from fraud. A reverse mortgage lender was found to have submitted false documents and statements to the U.S. Department of Housing and Urban Development (HUD) to receive government insurance on certain Home Equity Conversion Mortgages (HECMs). The lender misrepresented the amount of fees it charged the HECM borrowers and failed to report its true fees on HECM documents and forms to HUD. The lender also allegedly failed to properly document the consent it received from homeowners to pay certain fees. As a result, the lender has agreed to a settlement of $2.5 million and accepted responsibility for these violations. This settlement should serve as a warning to all lenders that the False Claims Act will be enforced when it comes to protecting the government from fraud.
This article was contributed on Dec 31, 2023
