We conducted a civil fraud review of an alleged loan origination fraud scheme involving a loan officer that assisted a borrower to purchase a home under the U.S. Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA) program. The alleged scheme involved submitting a false loan application and other documentation to obtain an FHA-insured loan on a home in Brentwood, CA. Based in part on OIG’s review, on December 20, 2013, HUD filed a complaint against the loan officer under the Program Fraud Civil Remedies Act of 1986 (PFCRA). The complaint alleged that the loan officer caused (1) the submission of false, fictitious, or fraudulent statements, certifications, or documents to HUD in connection with an application for an FHA-insured mortgage loan and (2) the submission to FHA of a false, fictitious, or fraudulent claim for insurance benefits. The complaint also alleged that these acts caused the mortgage holder of the FHA-insured mortgage loan to submit a false, fictitious, or fraudulent claim to FHA for $749,381 in insurance benefits.
On August 5, 2014, HUD’s Office of Hearings and Appeals granted a default motion and entered a judgment against the loan officer and in favor of the Government. The motion makes the loan officer liable to HUD for civil penalties of $7,500 and an assessment of $300,000, less $57,500 to be paid by the borrower according to his related settlement agreement with HUD. The total judgment against the loan officer is $250,000. Further, the default constitutes an admission of all facts alleged in the Government’s complaint and a waiver of the loan officer’s right to a hearing on such allegations.