Finance of America Reverse Agrees to Pay $2.47 Million to Resolve Alleged Liability for FHA-Insured Reverse Mortgage Lending Violations

WASHINGTON – 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 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.

“The Department is committed to working with HUD to protect vital lending programs such as the FHA’s HECM program,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “We will hold accountable those FHA lenders that knowingly and materially fail to abide by their promises to HUD.”

“Companies participating in federal programs must operate with honor and integrity,” said U.S. Attorney Timothy J. Shea of the District of Columbia.  “This settlement sends a clear message that we will not tolerate fraud against programs designed to financially help our nation’s seniors.”

“FHA and the taxpayers rely on lenders to originate HECM loans with integrity,” said Inspector General Rae Oliver Davis, U.S. Department of Housing and Urban Development.  “HUD OIG will continue to work with HUD and our law enforcement partners to ensure that FHA lenders are not engaged in unlawful practices that increase losses to HUD’s insurance funds and threaten the viability of HUD’s mortgage programs.”

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, when Urban Financial ordered appraisals for HECM loans prior to May 1, 2010, it 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. 

This matter was investigated by the Commercial Litigation Branch of the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the District of Columbia, HUD, and HUD’s Office of Inspector General.  The claims asserted against the defendant are allegations only, and there has been no determination of liability.