oversight

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




                                                    March 27, 2015

                                                                                                   MEMORANDUM NO:
                                                                                                   2015-CF-1802

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

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

SUBJECT:            Final Civil Action: Golden First Mortgage Corporation and Its Owner Settled
                    Alleged Violations of Failing To Comply With Federal Housing Administration
                    Underwriting Requirements (FHA ID #34475)


                                                 INTRODUCTION

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), assisted in an investigation into alleged violations of Federal Housing Administration
(FHA) regulations applicable to the direct endorsement program by Golden First Mortgage
Corporation and its owner. OIG’s participation in the investigation began due to a request for
assistance from the U.S. Attorney’s Office of the Southern District of New York. Golden First is
a former FHA-approved mortgage lender, with its principal place of business located in Great
Neck, NY.

                                                  BACKGROUND

Golden First participated in the direct endorsement program 1 from 1989 until 2010. As a direct
endorsement lender, Golden First had the authority to approve mortgage loans for FHA
insurance. Golden First ceased operations in 2010 and has not approved mortgage loans for
FHA insurance since that time.

1
    The program authorizes private-sector mortgage lenders to approve mortgage loans for insurance by FHA.
    Lenders approved for the program must follow various FHA requirements and provide annual and per loan
    certifications that the lender complied with these requirements when underwriting and approving loans for FHA
    insurance.

                                                          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.
On April 4, 2013, the U.S. Attorney’s Office of the Southern District of New York filed a
complaint against Golden First and its owner for not complying with FHA requirements. The
complaint was amended on August 13, 2013, alleging that from 2002 to 2010 (the covered
period), Golden First and its owner submitted false certifications to FHA and HUD concerning
compliance with program rules and endorsed loans in violation of these rules. As a result, the
Government incurred substantial losses in connection with loans that Golden First underwriters,
including the owner, endorsed for FHA insurance during the covered period. The Government’s
complaint further alleged that Golden First and its owner were liable under the False Claims Act,
31 U.S.C. (United Stated Code) 3729 et seq.

                                RESULTS OF INVESTIGATION

On December 31, 2014, the U.S. District Judge approved the settlement, in which Golden First
and its owner admitted, acknowledged, and accepted responsibility for the following:

      •   Failing to maintain a quality control program that complied with HUD-FHA
          requirements, contrary to representations in annual certifications submitted by Golden
          First. In these certifications, the lender certified to compliance with HUD-FHA
          regulations as a requirement to remain an FHA-approved lender.
      •   Endorsing for FHA mortgage insurance loans that did not meet HUD underwriting
          requirements and, therefore, were not eligible for FHA insurance under the direct
          endorsement program. As a result, Golden First submitted to HUD-FHA certifications
          stating that loans were eligible for FHA mortgage insurance when they were not, and
          HUD incurred losses when the borrowers on those loans defaulted.

To settle the matter, Golden First and its owner agreed to a judgment of $36 million against
Golden First and a $300,000 payment from the owner. Additionally, the owner is permanently
debarred from conducting any business with the Federal Government.

                                     RECOMMENDATION

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

1A.       Allow HUD OIG to post $300,000 to HUD’s Audit Resolution and Corrective Actions
          Tracking System as ineligible costs.




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