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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), completed a review of loan origination practices of Anchor Mortgage Corporation (Anchor), Chicago, IL. Our objective was to identify violations of Federal Housing Administration (FHA) requirements and the related losses incurred by HUD.

Based on our review, HUD sued the lender and its owner under the False Claims Act. In August 2010, the court entered a judgment of nearly $3 million against the lender and its owner. The court concluded that Anchor had provided false information or violated HUD regulations for 11 loans. The lender had provided false gift affidavits in connection with applications it submitted to obtain FHA-insured loans. It had also paid fees to a real estate company for referring borrowers, although it certified to HUD that it had paid no kickbacks, fees, or consideration of any type to anyone in connection with the transaction except as permitted by HUD rules.

We recommended that HUD collect the $2,766,517 in damages and penalties awarded against Anchor Mortgage and $226,424 in damages and penalties awarded against the owner for violating the False Claims Act.