On 8 August, DoJ fined PHH $74mn re HUD underwriting requirements.
- Agreed to pay $65mn to resolve FHA allegations and $9.45mn for VA and FHFA.
Alleged Violations
- PHH failed to meet requirements, when originating and underwriting mortgages.
- Specifically, FHA, VA, Fannie Mae and Freddie Mac re quality control requirement.
- From 2006, PHH participated as direct endorsement lender (DEL) in FHA program.
- DEL authorized to originate, underwrite, and endorse mortgages re FHA insurance.
- Under DEL, FHA does not review loan before is endorsed for insurance compliance.
- DEL must ensure proper underwriting and certify the mortgages re FHA insurance.
Loan Defects
- Cited loan defects which caused loans to be ineligible for FHA mortgage insurance.
- Did not document borrower credit, via pay stub, verify employment, credit reports.
- Nor verified that borrower had adequate earnest money deposit and funds to close.
- Failed to document borrower’s claimed net equity in a prior residence or paid debts.
- Including debts in borrower’s liabilities, exceeding HUD’s debt-to-income ratio level.
- Insuring loan for FHA, despite borrower not meeting the HUD statutory investment.
