Wholesale mortgage lender United Shore Financial Services will pay $48 million to settle claims brought by the U.S. Department of Justice (DOJ) that, from 2006 until 2012, the company originated loans backed by the Federal Housing Administration (FHA) that failed to meet FHA underwriting guidelines.
The DOJ alleges that United Shore’s faulty underwriting of hundreds of FHA mortgages resulted “in substantial losses of public funds” when borrowers defaulted on some of those loans.
The DOJ’s complaint also alleges that United Shore violated the FHA’s prohibition against paying commissions to underwriters based on the volume or value of mortgages they approve.
In addition, United Shore made “certain discretionary contributions” to its shareholders in January 2014, after the DOJ initiated its investigation into the family-owned firm.
“When lenders breach their duty of due diligence and make risky loans that go bad, taxpayers pay the bill,” says U.S. Attorney Barbara McQuade in a statement. “By holding accountable lenders who fail to comply with underwriting requirements, we hope to send a message to all lenders that they must comply with government standards for federally insured loans.”