We audited loans originated by Bankers Mortgage Group, Woodland Hills, CA, in response to a referral from the Office of Inspector General’s (OIG) Office of Investigation alleging that Bankers Mortgage Group originated loans with false documentation. Our objective was
to determine whether the lender originated FHA-insured loans using sufficient, reliable, and valid documentation.

Bankers Mortgage Group did not originate loans using sufficient, reliable, and valid documentation in compliance with HUD requirements. Specifically, 9 of 10 loans reviewed contained significant deficiencies that affected the integrity of data entered into the automated underwriting system. These nine loans with significant deficiencies were originated with false or questionable income and asset documentation. This included income that could not be verified, gifts to borrowers that lacked evidence of source of funds, and improperly sourced earnest money deposits.

This occurred because Bankers Mortgage Group disregarded FHA requirements pertaining to required documentation for loan originations. As a result, the FHA fund was put at risk for losses totaling more than $1.5 million.

We recommend that Bankers Mortgage Group or other responsible lender (1) indemnify HUD against potential losses of more than $1.5 million for eight loans and (2) reimburse the FHA insurance fund $58,704 for the actual loss on one loan. We also recommend pursuit of remedies under the Program Fraud Civil Remedies Act (31 U.S.C (United States Code) 3801-3812), civil money penalties (24 CFR (Code of Federal Regulations) 30.35), or both against Bankers Mortgage Group, its principals, or both for certifying to the truthfulness and correctness of false or questionable loan information. We also recommend that the HUD Quality Assurance Division (QAD) review the remaining loans that were originated by Bankers Mortgage Group, and take action as appropriate.