Primary Residential Mortgage Inc. and SecurityNational Mortgage Company announced separate agreements with the U.S. Department of Justice on behalf of the Department of Housing and Urban Development to pay $5 million and $4.25 million, respectively, to resolve allegations that they violated the False Claims Act, HousingWire.com reported today. According to the DOJ, both lenders allegedly violated the False Claims Act by “knowingly originating and underwriting mortgage loans insured by HUD’s Federal Housing Administration that did not meet applicable requirements.” The two lenders quickly replaced BB&T as the latest in a long string of lenders targeted by the DOJ for False Claims Act violations. The False Claims Act is designed to prosecute vendors the government feels fraudulently represented themselves while doing business with the nation. The DOJ cited that since at least January 2006, SecurityNational and PRMI have participated as Direct Endorsement Lenders (DELs) in the FHA insurance program. As DELs, the DOJ said both lenders had the authority to originate, underwrite and endorse mortgages for FHA insurance. Also, the FHA does not review a loan before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, relying, instead, on the efforts of the DEL to verify compliance.
