James B. Nutter & Company, a former mortgage lender based in Kansas City, Missouri, has agreed to pay $2.4 million to resolve allegations that it violated the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The company allegedly underwrote Home Equity Conversion Mortgages (HECM) insured by the Department of Housing and Urban Development (HUD)’s Federal Housing Administration (FHA) that did not meet program eligibility requirements.
“The HECM program helps support our nation’s senior citizens by providing an additional source of funds to supplement their income,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Together with our partners at HUD, we are committed to protecting the financial integrity of this critical program and to pursuing those who seek to abuse it.”
The FHA offers several mortgage insurance programs designed to help build and sustain strong communities across America. The HECM program is a reverse mortgage program specifically for senior homeowners aged 62 and older. It allows seniors to access the equity in their residences through a mortgage agreement with a lender that is insured against loss by the FHA.
Lenders participating in the FHA’s HECM program can underwrite mortgages without government review for compliance with underwriting and origination requirements. If an FHA-insured loan defaults, the holder can recover certain losses from the United States. Lenders must follow FHA rules to ensure only eligible mortgages are insured by the government.
The settlement addresses allegations from a lawsuit filed in 2020 that James B. Nutter & Company knowingly violated FHA underwriting requirements by allowing inexperienced temporary staff to underwrite FHA-insured loans and submitting loans for FHA insurance with falsified or prematurely affixed underwriter signatures.
“This case sought to redress serious violations of FHA requirements that posed a risk to the HECM program,” said HUD General Counsel Damon Smith. “HUD will continue to protect the integrity of this important mortgage program that serves our nation’s senior citizens.”
“The U.S. Attorney’s Office is dedicated to seeking recovery from mortgage lenders who take advantage of FHA programs and ignore essential program requirements,” said U.S. Attorney Teresa A. Moore for the Western District of Missouri. “The integrity and resources of those important programs must not be put at risk by mortgage lenders who put their own financial interests first.”
“Our office continues its diligent pursuit of mortgage originators that do not play by the rules,” said U.S. Attorney Matthew Graves for the District of Columbia. “If a lender is asking the government to insure its loans, the government expects that lender to employ qualified underwriters.”
“This case and resulting $2.4 million settlement demonstrate HUD Office of Inspector General's commitment," said Inspector General Rae Oliver Davis of HUD.
The investigation was coordinated among various entities including the Commercial Litigation Branch of Justice Department’s Civil Division, U.S Attorneys’ Offices for Western District Missouri, District Columbia, HUD, HUD Office Inspector General.
Trial Attorneys Christopher Reimer, Kelly Phipps, Yifan Wang Wilma Metcalf handled matter along with Assistant U.S Attorney Cindi Woolery Western District Missouri Assistant U.S Attorneys Brian Hudak Benton Peterson District Columbia managed litigation resolved captioned United States v James B Nutter Co Case No 4:20-cv-874-RK WDMO
The claims resolved by settlement are allegations only There has been no determination liability
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