The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), OIG referred alleged violations to HUD’s Office of Program Enforcement for action under the Program Fraud Civil Remedies Act based on an audit of Shea Mortgage that found it did not follow HUD requirements when it underwrote loans that had executed and recorded agreements containing prohibited restrictive covenants. HUD’s Office of Program Enforcement reviewed additional mortgage loans that were underwritten by Shea Mortgage and insured by FHA. On November 17, 2015, HUD issued a demand letter to Shea Mortgage for 10 loans that HUD believed violated the Program Fraud Civil Remedies Act of 1986, 31 U.S.C. (United State Code) 3801-3812, as implemented by 24 CFR (Code of Federal Regulations) Part 28. Shea Mortgage denied HUD’s allegations; however, HUD maintained that Shea Mortgage was liable under the Act for claims relating to three FHA loans.
On June 24, 2016, Shea Mortgage entered into a settlement agreement with HUD. To avoid further expense and administrative proceedings and to reach a satisfactory resolution of the matter, Shea Mortgage agreed to pay HUD $133,231 for alleged violations concerning three loans. Of this amount, HUD was to receive $119,336 for losses incurred on the loans and the remainder was to be provided to other Federal entities. The settlement agreement did not constitute an admission of liability or fault by any party.