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Press Release
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:
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 USAGAN.PressEmails@usdoj.gov 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 http://www.justice.gov/usao/gan/.