Land Home Financial Services, Inc. Settled Alleged Violations of Failing To Comply With Federal Housing Administration Loan Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-09-19.

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 19, 2016
                                                                                              MEMORANDUM NO:

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

FROM:         Christeen Thomas
              Director, Joint Civil Fraud Division, GAW

SUBJECT:      Final Civil Action: Land Home Financial Services, Inc., Settled Allegations of
              Failing To Comply With HUD’s Federal Housing Administration Loan


The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG), assisted the Office of Program Enforcement in the investigation of Land Home Financial
Services, Inc. Land Home’s principal place of business is in Concord, CA.


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.

Land Home became an FHA-approved direct endorsement lender on September 25, 2000. The
direct endorsement lender 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. FHA insurance
protects lenders against losses as the result of borrowers defaulting on their mortgages. The
lenders bear minimal financial risk because FHA will pay a claim to the lender when a borrower
defaults on an FHA-insured mortgage.

                                               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 Land Home on September 1,
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 Land Home falsely certified that a loan it underwrote was eligible for FHA mortgage
insurance. Specifically, Land Home had failed to obtain sufficient explanations for the
borrower’s negative credit. The borrower made only three payments before defaulting on the
loan. As a result, HUD paid a claim and incurred an unnecessary loss because the loan should
not have been insured.
On February 12, 2016, Land Home entered into a settlement agreement to pay HUD $45,000 to
resolve the matter. However, Land Home denied that its loan origination activities violated
HUD requirements or the Program Fraud Civil Remedies Act. HUD and Land Home entered
into the settlement agreement to avoid further expense and administrative proceedings and
agreed that the settlement was not an admission of liability or fault on the part of any party.


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

1A.        Acknowledge that the attached settlement agreement for $45,000 represents an amount
           due HUD.

           As of the date of this memorandum, the settlement amount due HUD had been paid in
           full. Therefore, no further action is required by the Office of General Counsel. At
           issuance of this memorandum, HUD OIG will enter a management decision into HUD’s
           Audit Resolution and Corrective Action Tracking System, along with the supporting
           payment information to show that final action was completed

    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.