oversight

Mason-McDuffie Mortgage Corporation Settled Allegations of Failing To Comply With HUD's Federal Housing Administration Loan Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-09-28.

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




                                           September 28, 2015
                                                                                              MEMORANDUM NO:
                                                                                              2015-CF-1807



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

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

SUBJECT:              Final Civil Action: Mason-McDuffie Mortgage Corporation Settled
                      Allegations of Failing To Comply With HUD’s Federal Housing
                      Administration Loan Requirements


                                           INTRODUCTION

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), conducted an investigation of Mason-McDuffie Mortgage Corporation to determine
whether it violated HUD requirements when underwriting loans insured by the Federal Housing
Administration (FHA). Mason-McDuffie was approved on September 1, 2005, as an FHA
mortgage lender, and its principal place of business is located in San Ramon, CA.

                                             BACKGROUND

FHA is a component of HUD. The program 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.

HUD’s direct endorsement 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.
                                     RESULTS OF INVESTIGATION

Based in part on OIG’s review, HUD filed a complaint against Mason-McDuffie on July 28,
2015, under the Program Fraud Civil Remedies Act of 1986, 31 U.S.C. (United States Code)
3801-3812, 1 as implemented by 24 CFR (Code of Federal Regulations) Part 28. HUD alleged
that Mason-McDuffie falsely certified that certain loans it underwrote were eligible for FHA
mortgage insurance. As a result, HUD unnecessarily paid claims and incurred losses because
these loans should not have been insured.

On August 13, 2015, Mason-McDuffie entered into a settlement agreement with HUD related to
six FHA loans that it had submitted for mortgage insurance. It agreed to pay $465,981 to HUD,
with an initial payment of $50,000 at settlement and the balance to be paid by February 2017.
However, Mason-McDuffie denied that it violated HUD regulations or the Program Fraud Civil
Remedies Act. The parties entered into the settlement agreement to avoid expense and
administrative proceedings and to reach a satisfactory resolution of the matter. HUD and
Mason-McDuffie also agreed that the settlement was not an admission of liability or fault on the
part of any party.

                                            RECOMMENDATION

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

1A.       Ensure that HUD records the $465,981 settlement due and the $50,000 payment
          received at settlement to recognize funds due as return of an ineligible cost.




1
    The Program Fraud Civil Remedies Act establishes remedies for false statements and false claims valued at
    $150,000 or less that are submitted to the Federal Government or to intermediaries of the Government.


                                                          2