United Shore Agrees to $48M Settlement with DOJ

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United Shore Financial Services, a Troy, Mich.-based lender, has agreed to pay $48 million to settle allegations that it violated the False Claims Act.

The Department of Justice alleged that USFS did not comply with certain origination, underwriting and quality control requirements while participating in the Federal Housing Administration's direct endorsement lender program. Consequently, the Department of Housing and Urban Development insured hundreds of loans that United Shore approved that should not have been eligible for FHA coverage, subsequently taking losses due to claims on those loans.

"USFS acknowledged that it failed to comply with FHA underwriting and quality control requirements, resulting in improperly originated mortgages," John Vaudreuil, a U.S. attorney for the Western District of Wisconsin said in a news release. "While USFS deserves credit for acknowledging and resolving its conduct, that conduct not only resulted in substantial losses of public funds, but also put Wisconsin homeowners at risk of losing their homes or ruining their credit."

United Shore, which is both a retail lender and the parent of United Wholesale Mortgage, did not immediately respond to a request for comment.

In particular, the DOJ said that United Shore admitted to pressuring underwriters to approve FHA mortgages under a compensation plan that tied pay to the percentage of loans approved. United Shore also falsely certified that direct endorsement underwriters reviewed appraisal reports prior to mortgages being approved for FHA insurance; under the DEL program, the FHA does not review that lenders are complying with the agency's requirements.

The DOJ also identified other issues with United Shore's compliance practices. The lender allegedly did not provide senior management with "meaningful information" regarding quality control findings. Additionally, United Shore did not meet HUD's self-reporting requirements, only self-reporting three loans to the department despite quality control reviews finding hundreds of FHA-insured loans that were materially deficient at issuance.

The alleged activities occurred between from 2006 through 2011. The DOJ also said that United Shore "made certain discretionary distributions to a shareholder in the company" after the federal government began investigating the company in January 2014.

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