Mortgage Lender Agrees To $4.2 Million Settlement
A Southfield mortgage lender has agreed to pay $4.2 million to resolve allegations that it violated the False Claims Act in its origination of loans backed by the federal government, United States Attorney Barbara L. McQuade announced today.
GTL Investments, Inc., doing business as John Adams Mortgage Company (JAMCO), entered into the agreement with the U.S. Attorney’s Office for the Eastern District of Michigan to resolve allegations that it originated mortgage loans that had material underwriting deficiencies. The loans were guaranteed by the Federal Housing Administration.
The FHA makes home financing available by insuring residential mortgages for the purchase of properties with modest down-payments for purchasers meeting certain criteria, known as underwriting standards. The original lender or loan originator is responsible for making sure that the borrower meets these underwriting standards to minimize the possibility of default and the need for the FHA to pay the mortgage holder for the losses caused by the default.
An investigation by the Office of Inspector General for the Department of Housing and Urban Development found that GTL originated 31 FHA mortgage loans between January 2008 and April 2012 that had material underwriting deficiencies. Twenty-nine of these loans went to claim, causing the FHA damages of $2,445,912. The investigation also identified two loans that had not yet been presented for payment by the FHA with approximately $250,000 in potential losses. GTL has agreed to indemnify the FHA for these two loans.
“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,” McQuade said.