The Office of the Inspector General (OIG) for the Department of Housing and Urban Development (HUD) recently issued its Semiannual Report to Congress for the period from April through September 2018. Among other things, the report outlines recent investigations by OIG into borrowers, lenders, and housing counseling agencies.
OIG reviewed HUD’s preforeclosure sale claim process for single-family loans. It determined that HUD paid more than $413 million in unnecessary interest and other costs for preforeclosure claims because lenders did not complete servicing actions for defaulted loans within established timeframes. OIG recommended a change to HUD’s governing regulations to require curtailment of preforeclosure interest and other costs caused by servicing delays.
The report also details several criminal prosecutions. In Newark, New Jersey, 13 individuals were sentenced after pleading guilty to conspiracy, wire fraud, and tax fraud. The defendants conspired to obtain mortgage loans by recruiting straw buyers to purchase single-family properties and to submit fraudulent loan applications. The scheme involved a total of 24 loans, including 17 FHA loans, and resulted in several defaults that exposed lenders and the FHA to more than $2 million in potential losses.
In Dallas, a vice president of a HUD-approved housing counseling agency was sentenced to five years incarceration and ordered to pay more than $600,000 in restitution. The defendant had previously pled guilty to mail fraud for defrauding homeowners under the guise of providing them with mortgage assistance. The defendant falsified paperwork, stole homeowners’ mortgage payments, and extracted large payments from homeowners as part of a falsely claimed unsuccessful effort to save their homes from foreclosure.
The report also provides an update on FHA’s Mortgagee Review Board (MRB). The report details various improvements made by MRB since OIG’s most recent evaluation. OIG reports that MRB has increased the consistency of penalties given to lenders for similar violations, met the requirement to publish each administrative action it brings against lenders in the Federal Register, and resolved a longstanding backlog of cases.
