We audited loanDepot.com to evaluate its quality control (QC) program for originating and underwriting Single Family Federal Housing Administration (FHA)-insured loans. We selected loanDepot for review based on its loan volume and delinquency rate and because its rate of self-reporting loans to HUD when it identified fraud, material misrepresentations, and other material findings that it could not mitigate was below average for more than a 5-year period.
We found that loanDepot’s QC program for originating and underwriting FHA-insured loans was not sufficient. Specifically, loanDepot (1) did not select the proper number of loans for review and maintain complete and accurate data to document its loan selection process; (2) missed material deficiencies; and (3) did not adequately assess, mitigate, and report loan review findings, which included self-reporting loans to HUD when required. These issues occurred because loanDepot had insufficient controls over its QC program. As a result, HUD did not have assurance that loanDepot’s QC program fully achieved its intended purposes, which include, among other things, protecting the FHA insurance fund and lender from unacceptable risk, guarding against fraud, and ensuring timely and appropriate corrective action.
We recommended that HUD require loanDepot to (1) update its QC plan and related procedures to align with HUD requirements; (2) provide training to its staff and management on HUD requirements for lender QC programs; (3) review the loans that it had not selected and take appropriate actions when applicable; and (4) evaluate its QC files for the loans in which it identified material findings to confirm whether it self-reported to HUD all findings of fraud or material misrepresentation, along with any other material findings that it did not acceptably mitigate.
Recommendations
Housing
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Status2025-NY-1002-001-AOpenClosed
Update its QC plan and related processes and procedures to align with requirements for loan selection, including maintaining data and documentation showing how sample sizes and loan selections were determined.
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Status2025-NY-1002-001-BOpenClosed
Update its QC plan and related processes and procedures to align with requirements for (1) loan file reviews, (2) assessment of findings, (3) mitigation of findings, and (4) reporting findings to HUD when required.
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Status2025-NY-1002-001-COpenClosed
Provide annual training to its staff and management on HUD requirements for lender QC programs and provide proof of training to HUD.
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Status2025-NY-1002-001-DOpenClosed
Conduct up to 1,190 additional post-closing QC reviews to meet sample size and composition requirements and submit the results to HUD, including all findings of fraud or material misrepresentation, along with any other material findings that it is unable to mitigate. If required, loanDepot should execute indemnification agreements or reimburse claims paid to help protect the FHA insurance fund from unacceptable risk.
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Status2025-NY-1002-001-EOpenClosed
Review the 32 EPD loans not previously selected for review and submit the results to HUD, including all findings of fraud or material misrepresentation, along with any other material findings that it is unable to mitigate. If required, loanDepot should execute indemnification agreements or reimburse claims paid to help protect the FHA insurance fund from unacceptable risk.
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Status2025-NY-1002-001-FOpenClosed
Evaluate its QC files for the 1,579 loans in which it identified material findings to confirm whether it self-reported to HUD all findings of fraud or material misrepresentation, along with any other material findings that its records did not show have been acceptably mitigated. If required, loanDepot should execute indemnification agreements or reimburse claims paid to help protect the FHA insurance fund from unacceptable risk.
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Status2025-NY-1002-001-GOpenClosed$1,136,089.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Provide indemnification agreements or documentation to support the 14 loans in which it identified material findings that it did not acceptably mitigate or self-report to HUD. Implementation of this recommendation will protect the FHA insurance fund from an estimated loss of $1,136,089.