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Press Release

Branch Banking & Trust Company, N.A. agrees to pay $83 Million to Resolve False Claims Act Liability arising from FHA-Insured Mortgage Lending

For Immediate Release
U.S. Attorney's Office, Northern District of Georgia

ATLANTA – Branch, Banking & Trust Company (“BB&T”) has agreed to pay the United States $83 million to resolve allegations that it violated the False Claims Act by falsely certifying that it had complied with critical underwriting and quality control (“QC”) requirements when originating “FHA loans” – i.e., loans insured by the Federal Housing Administration (“FHA”), which is part of the U.S. Department of Housing and Urban Development (“HUD”).  In truth, BB&T, over an extended period of time, had failed to comply with key HUD underwriting and QC requirements. HUD only extends insurance to loans where the borrower is creditworthy and demonstrates the ability to repay the loan based upon the FHA’s underwriting standards.

“While profiting from the FHA program, BB&T exposed the taxpayers to losses by failing to comply with HUD guidelines, and then took the additional step of falsely certifying that it had complied with such guidelines” said John A. Horn, the U.S. Attorney for the Northern District of Georgia.  “This settlement recovers substantial losses caused by BB&T’s decision to place its own profits above its commitment to adhere to HUD underwriting and quality control requirements.”

“The FHA program depends on Direct Endorsement Lenders endorsing only eligible loans for FHA mortgage insurance, and complying with HUD’s quality control requirements,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Lenders like BB&T that participate in the FHA program must make adherence to the FHA program rules a priority.  The Department has and will continue to hold accountable those lenders that prioritize profits over program compliance.”

“Lenders are required to apply FHA’s standards to each mortgage loan we insure and to honestly certify to us that they’ve done so,” said Associate General Counsel Dane M. Narode for HUD’s Program Enforcement.  “Today’s settlement reminds all lenders that sound underwriting is the bedrock of a healthy housing market and the financial futures of homeowners we support.”

“Today’s settlement agreement resolves allegations that BB&T, entrusted by American taxpayers to comply with FHA regulations, failed to conform with certain FHA origination, underwriting and quality control requirements,” said Inspector General David A. Montoya for HUD.  “This settlement demonstrates a continued commitment to address the failures and halt the business practices that potentially harm the FHA program and its participants.”

Between January 2006 and January 2012, BB&T participated in the FHA insurance program as a Direct Endorsement Lender (“DE Lender”).  As a DE Lender, BB&T had the authority to originate, underwrite, and endorse mortgages for FHA insurance.  If a DE Lender such as BB&T approves a mortgage loan for FHA insurance, and the loan later defaults, the holder of the loan may submit an insurance claim to the Government to recover its losses on the loan.

Under the DE Program, the Government does not review a loan before it is endorsed for FHA insurance.  Instead, FHA and HUD rely upon DE Lenders to follow program rules, which require that a lender: (1) adhere to HUD underwriting guidelines; (2) maintain a QC program that can identify and correct deficiencies in their underwriting practices; and (3) self-report to HUD materially deficient loans identified by their QC program, or otherwise. 

The settlement announced today resolves allegations that BB&T failed to comply with FHA origination, underwriting, and QC requirements.  As part of the settlement, BB&T admitted to the following facts: 

  • Between January 1, 2006 and September 30, 2014, BB&T certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to HUD’s QC requirements.  BB&T significantly increased its loan volume between 2006 and 2009 – more than doubling all loan originations, while increasing the number of FHA insured loans six fold.  This increase in volume was accompanied by an increase in the number of loans internally rated “Serious-Marketability” – the most significant BB&T QC defect rating, and a defect that rendered a loan ineligible for FHA insurance.  Between 2007 and 2011, the percentage of loans underwritten by BB&T each year that were rated Serious-Marketability by its QC department always exceeded 30 percent, and exceeded as much as 50 percent in 2010 and 2011.  BB&T nevertheless endorsed many of these loans for FHA insurance and, if they defaulted, sought payment from HUD for the insured loans.


  • The monthly reviews and reports that BB&T’s QC department shared with management alerted BB&T to deficiencies in many of its FHA loans.  A 2010 BB&T internal memorandum stated that “increased volume of FHA requests and changes to regulatory requirements have resulted in origination, processing and underwriting errors.  Some employees are not applying current and accurate FHA guidelines.”  A proposal to improve BB&T’s underwriting of FHA loans with additional training as well as a testing and certification process for underwriters was prepared in 2010, but neither recommendation was implemented until after 2014.


  • Additionally, between 2006 and 2014, BB&T’s QC process did not satisfy certain FHA requirements.  Although loan volume more than doubled from 2006 to 2009, the number of QC employees remained the same.  The QC department requested additional employees in 2009, yet new employees were not added until 2013.  Because BB&T’s QC department did not have adequate staff, it instituted a cap on the number of loans it reviewed.  As a result, between 2009 and 2014, the QC department did not always review the number of loans necessary to comply with HUD’s loan review sampling requirements.  Additionally, BB&T did not perform reviews of its lender branch offices, as required by HUD, before beginning the reviews again in late 2014.


  • Finally, since at least 2006, HUD has required self-reporting.  However, despite internal ratings showing that 30 percent or more of the loans underwritten by BB&T between 2007 and 2011 had Serious-Marketability findings, and were thus ineligible for FHA insurance, BB&T did not self-report any loans containing material underwriting defects until 2013.


BB&T’s conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

Assistant United States Attorneys David A. O’Neal and Paris A. Wynn handled this matter for the U.S. Attorney’s Office.

The investigation of the allegations in the Government’s complaint was a coordinated effort between the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Northern District of Georgia, HUD, and HUD’s Office of Inspector General.  The claims asserted against BB&T are allegations only, and there has been no determination of liability.

For further information please contact the U.S. Attorney’s Public Affairs Office at or (404) 581-6016.  The Internet address for the home page for the U.S. Attorney’s Office for the Northern District of Georgia Atlanta Division is

Updated September 29, 2016

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