Reverse mortgage lender settles false claim allegations for nearly $2.5 million

by Ben Vernia | April 1st, 2020

On March 31, the Department of Justice announced that Tulsa, Oklahoma-based Finance of America Reverse will make civil and administrative payments totaling $2.47 million to settle allegations it underwrote federally-insured reverse home mortgages in violation of federal standards. According to DOJ’s press release:

Today, the Department of Justice announced that Finance of America Reverse (FAR) has agreed to pay the United States $2.47 million to resolve allegations that a predecessor entity, Urban Financial Group Inc. (Urban Financial), violated the False Claims Act (FCA) by knowingly originating and underwriting hundreds of Home Equity Conversion Mortgage (HECM) loans insured by the Federal Housing Administration (FHA) that did not meet critical U.S. Department of Housing and Urban Development (HUD) requirements.

FAR will pay $1.97 million to resolve FCA claims and an additional $500,000 to HUD to resolve its administrative liability.  FAR is a mortgage lender based in Tulsa, Oklahoma, that acquired Urban Financial Group Inc. in November of 2013.

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The FHA, a component of HUD, offers numerous mortgage insurance programs intended to help build and sustain strong communities across America.  The HECM program is a reverse mortgage program specifically for senior homeowners who are 62 and older.  The program allows seniors to withdraw some of the equity in their homes so that they can supplement their incomes and age in place.  Seniors enter into mortgage agreements with a lender that are insured against loss by the FHA.  The program relies heavily on lenders using reliable and accurate appraisals to approve loans for FHA’s mortgage insurance. 

The settlement announced today resolves allegations that Urban Financial, when it ordered appraisals for HECM loans prior to May 1, 2010, used a form that provided appraisers with the loan amount and otherwise improperly communicated certain information to them in an attempt to influence the appraised value, in violation of FHA requirements. 

The case apparently arose from a government investigation, and not from a whistleblower’s lawsuit.

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