Final Civil Action - Group One Mortgage, Inc., Settled Allegations of Failing To Comply With Federal Housing Administration Underwriting Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-03-27.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                U.S. DEPARTMENT OF
                               HOUSING AND URBAN DEVELOPMENT
                                        OFFICE OF INSPECTOR GENERAL

                                              March 27, 2015

                                                                                             MEMORANDUM NO:

TO:            Dane M. Narode
               Associate General Counsel, Office of Program Enforcement, CACC

FROM:          Kimberly Randall
               Director, Joint Civil Fraud Division, GAW

SUBJECT:       Final Civil Action: Group One Mortgage, Inc., Settled Allegations of Failing To
               Comply With Federal Housing Administration Underwriting Requirements


The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), assisted the U.S. Attorney’s Office, Southern District of Florida, in the civil investigation
of Group One Mortgage, Inc. Group One’s principal place of business is located in Jupiter, FL.


The Federal Housing Administration (FHA) is a component of HUD. It provides mortgage
insurance for a person to purchase or refinance a principal residence. The mortgage loan is
funded by a lending institution, such as a mortgage company or bank, and the mortgage is
insured by FHA.

Group One has participated in the FHA insurance program since 2004 and became a direct
endorsement lender in 2005. The direct endorsement program authorizes private-sector
mortgage lenders to approve mortgage loans for FHA insurance. Lenders approved for the
program must follow FHA requirements and provide annual and per loan certifications that the
lender complied with these requirements when underwriting and approving loans for FHA
insurance. When a borrower defaults on an FHA-insured loan, HUD pays the insurance claims
submitted by or on behalf of the lender.

                                                    Joint Civil Fraud Division
                                     400 State Avenue, Suite 501, Kansas City, KS 66101
                               Visit the Office of Inspector General Web site at www.hudoig.gov.
                                  RESULTS OF INVESTIGATION

Based on our review of FHA loans underwritten by Group One, the United States contended that
it had certain civil claims against the lender arising from false claims that Group One had made
to FHA as a direct endorsement lender. The United States alleged that Group One approved four
loans 1 for FHA insurance but did not underwrite the loans in accordance with HUD-FHA
regulations. It further alleged that Group One did not use due diligence to comply with HUD
handbook requirements and ensure that the loans it approved on behalf of HUD were eligible for
FHA insurance. Group One denied the allegations.

On November 19, 2014, Group One entered into a settlement agreement to pay $406,000 to settle
allegations that it had submitted false claims to FHA in violation of the False Claims Act, 31
U.S.C. (United States Code) 3729-3733, and common law causes of action. Of the settlement
total, the FHA insurance fund was to receive $376,523, and the remaining $29,477 was to be
paid to other Federal entities. The parties to the settlement agreement entered into the agreement
to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation of the alleged
claims. The parties also agreed that the settlement was neither an admission of liability by
Group One nor a concession by the United States that its claims were not well founded.


We recommend that HUD’s Office of General Counsel, Office of Program Enforcement,

1A.       Allow HUD OIG to post $376,523 to HUD’s Audit Resolution and Corrective Actions
          Tracking System as ineligible costs.

    FHA loan numbers 094-5384484, 094-5394735, 091-4606472, and 095-0508197