Utah-based lenders Primary Residential Mortgage Inc. and SecurityNational Mortgage Co. have agreed to pay a total of nearly $10 million in separate settlements with the Department of Justice.
Primary Residential Mortgage agreed to a $5 million settlement, while SecurityNational consented to a $4.25 million agreement. Neither company admitted liability in agreeing to their respective settlements, according to the announcement Monday, and the settlement did not impact their Department of Housing and Urban Development-approved mortgage status.
The settlements address allegations that the two companies violated the False Claims Act by originating and underwriting roughly 200 mortgage loans insured by the Federal Housing Administration that did not meet certain requirements. The Department of Justice noted in its press release that HUD "incurred substantial losses" after paying insurance claims on these loans.
"Today’s settlements resolve allegations that these lenders, entrusted by American taxpayers to abide by FHA rules, failed to comply with certain FHA origination, underwriting and quality control requirements," HUD's Inspector General David Montoya said in a news release. "The settlements demonstrate a continued commitment to address the failures and halt the business practices that potentially harm the FHA program and its participants."
The government claims that Primary Residential Mortgage did not document the income or assets used to qualify borrowers for an FHA loan. The company also allegedly did not verify the borrower's earnest money deposit or whether they were delinquent on a second pre-existing FHA loan.
In the case of SecurityNational, the government alleges that the lender originated loans that should not have received FHA insurance, including to one borrower who was delinquent on federal debt and had an unpaid court judgment and to another borrower who was four months' delinquent on the underlying mortgage prior to an FHA refinance.
"We are pleased to reach a resolution of this matter and believe it permits us to move forward with our business confidently," Primary Residential Mortgage CEO and President David Zitting said in a news release.
The company also originated a loan where the mortgage amount exceeded HUD's loan-to-value requirements. Similar to Primary Residential Mortgage, the Department of Justice claims the company failed to document income used to qualify borrowers and failed to analyze the borrower's delinquent credit history.
SecurityNational General Counsel Jeffrey Stephens said in an email that the company "made a business decision" to resolve the matter "in order to avoid the extended distractions and expenses associated with protracted litigation."
