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Date: 1/5/2006
Case Style: Federal Housing Administration
v.
ABN Amro Mortgage
Group Inc.
Case Number: Unknown1/5/2006
Judge: Unknown
Court: Washington, District of Columbia
Plaintiff's Attorney: Unknown
Defendant's Attorney: Unknown
Description:
The Department of Housing and Urban Development, together with the
Department's Office of Inspector General, the Justice Department and the Office
of the Comptroller of the Currency, today announced a more than $41 million
settlement against mortgage giant ABN AMRO Mortgage Group for falsifying
documents in tens of thousands of loans insured by the Federal Housing
Administration (FHA). This landmark agreement represents that largest monetary
settlement of an enforcement action in FHA's history.
In 2003, HUD discovered underwriting deficiencies and improper conduct by an
ABN employee. After the matter was brought to the company's attention, ABN launched
an internal investigation and discovered that, in direct violation of FHA
rules, a number of its employees falsely certified that two ABN underwriters
had reviewed more than 28,000 loans prior to FHA endorsement when, in fact,
they had not.
As a result, ABN has agreed to pay the U.S. Government $16.85 million and
will not submit hundreds of defaulted loans to HUD, saving the FHA insurance
fund an estimated $24.35 million in losses. The total value of the settlement
agreement announced today is estimated to be more than $41 million.
"This settlement is the result of a lot of tireless dedication, hard
work and close coordination on behalf of HUD, the Department's Inspector
General and our other federal partners," said Keith E. Gottfried, HUD's
General Counsel. "This action demonstrates our steadfast and enduring
commitment to making sure HUD's programs are administered in accordance with
the letter and intent of the law and are free from fraud and abuse."
Brian Montgomery, HUD's Assistant Secretary for Housing-Federal Housing
Commissioner said, "As much as we intend to aggressively expand the FHA
program to help even more families realize their American Dream and become
homeowners, we will not do so at the expense of the financial soundness, integrity
or reputation of the Federal Housing Administration. This settlement is
evidence that we will take immediate action if our participating lenders,
however large or small, fail to follow our underwriting requirements."
HUD's Inspector General Kenneth Donahue, Sr. added, " This team effort
reimburses FHA and the government for, and protects it from, tens of millions
of dollars in mortgage insurance losses that were caused by lax procedures
during the heyday of the housing boom. Equally important, it sends the
unmistakable message to the mortgage industry as a whole that the Government
will not tolerate such blatant violations of FHA's underwriting requirements
and other improper conduct by lenders that threaten the integrity of the FHA
program and we will hold lenders responsible for such activities. The FHA
insurance fund and the American taxpayer must always be protected."
Background
Under the FHA mortgage insurance program, ABN has "direct endorsement
authority" to approve FHA-insured loans, allowing the company to
underwrite loans and submit them to FHA for insurance endorsement. In general,
FHA requires that before a lender may submit a loan for endorsement, its
underwriters must perform due diligence and make certain certifications,
including that the loan meets FHA's underwriting requirements.
HUD's Office of General Counsel and HUD's Office of Inspector General
determined that there were potential violations of the False Claims Act and the
Program Fraud Civil Remedies Act involving more than 28,000 loans submitted to
HUD with false certifications. Loans were submitted with certifications
purporting to be signed by one of two underwriters when neither had, in fact,
actually signed the certifications nor personally reviewed the loans to
determine whether they qualified for FHA insurance.
In addition to the $16.85 million in cash payments to the Government, ABN
AMRO agreed that it will not submit insurance claims on 783 defaulted loans,
saving the FHA insurance fund an estimated $24.35 million in potential losses.
In connection with resolving the matter, ABN informed HUD that it has:
* Taken disciplinary action against the executives, managers and other
employees responsible for the improper conduct leading to HUD's enforcement
action, including the termination of several senior-level employees and the
reassignment of others;
* Replaced the entire management structure of the ABN Government Loan
Originations Group;
* Reorganized the entire ABN Mortgage Group;
* Placed senior executives in positions of direct authority over, and
accountability for, the FHA loan program within ABN;
* Hired a new senior executive to supervise the government loan
underwriters; and,
* Implemented training programs for both the ABN Government Loan
Originations Group and the underwriting department on the importance of HUD
certifications for FHA-insured loans.
Since 1998, HUD's Mortgagee Review Board (MRB), which oversees the
performance of lenders participating in FHA insurance programs, has imposed
more than $16 million in civil money penalties, and has taken 292 actions that
include settlement agreements, suspensions, and withdrawals of approval against
FHA lenders. The Mortgagee Review Board has obtained indemnification agreements
for close to 1,500 loans, which has resulted in over $50 million in savings to
HUD.
HUD's Assistant Secretary for Housing-Federal Housing Commissioner serves as
the chairman of the MRB. The other HUD officials who comprise the Mortgagee
Review Board are: HUD's General Counsel; the President of Ginnie Mae; HUD's
Chief Financial Officer; HUD's Assistant Secretary for Administration; and, the
Director of the HUD Enforcement Center. All MRB administrative actions are
published in the Federal Register.
HUD is the nation's housing agency committed to increasing homeownership,
particularly among minorities; creating affordable housing opportunities for
low-income Americans; and supporting the homeless, elderly, people with
disabilities and people living with AIDS. The Department also promotes economic
and community development as well as enforces the nation's fair housing laws.
Outcome: Settled for $41 million.
Plaintiff's Experts: Unknown
Defendant's Experts: Unknown
Comments: None