We are reaching the end of a decade since mortgage fraud hit its peak in 2007. However, the latest settlement by IberiaBank suggests that at least one lender continued aspects of mortgage fraud against the Federal Housing Administration (FHA) well after becoming informed of their wrongdoing.
IberiaBank agreed to pay the United States more than $11 million in response to allegations that it did not comply with federal requirements on FHA mortgage loans. The settlement resulted from allegations made under the False Claims Act by whistleblowers who were formerly employed at the bank.
Similar to other allegations against banks during the financial crisis, IberiaBank admitted that certain loan files contained inadequate documentation on income, inadequate verification of the down payment, and unresolved appraisal discrepancies.
The most disturbing part of the allegations is that the bank told HUD that it was no longer paying underwriter commissions after a HUD review in 2010 notified IberiaBank that it was not in compliance with a prohibition on underwriter commissions. Nevertheless, the bank did not disclose that it was making incentive payments to underwriters. These payments continued to be made by the bank until 2014. As a result, the period of covered conduct for the settlement was from the beginning of 2005 until the end of 2014.
IberiaBank is not the only one to be in the news recently for problems in its mortgage department. Wells Fargo is in the process of refunding rate-lock extension fees assessed to mortgage borrowers where the delay was due to its practices. President Trump recently denied media reports that the U.S. was going to let Wells Fargo off the hook without a fine for falsifying records to blame the mortgage-processing delays on the consumers borrowing money. Instead, President Trump suggested in a tweet that while he has promised to cut regulations, penalties for those caught cheating would be severe.
According to media reports, Wells Fargo said that it assessed around $98 million in rate-lock extension fees, although it contends some of those were legitimate. Wells Fargo has already paid around $200 million in fines and penalties following allegations which emerged last year that it opened millions of fake accounts on behalf of customers.
If you are a current or former mortgage industry professional with evidence of lending fraud involving FHA loans, call our mortgage whistleblower attorneys at 1-800-590-4116 for a free, confidential initial consultation.