Alabama-based Regions Bank has agreed to pay more than $52 million to the government to resolve allegations that it improperly handled mortgage loans insured by the Federal Housing Administration (FHA). Regions, a unit of Birmingham, Ala.-based Regions Financial (RF), admitted that between Jan. 1, 2006, and Dec. 31, 2011, it certified for FHA insurance mortgage loans that did not meet the U.S. Department of Housing and Urban Development’s (HUD) standards for borrower creditworthiness, the Justice Department says. That’s a problem since the FHA relies on the credit measure recommendations from so-called direct endorsement lenders like Regions.
Regions also did not follow the appropriate “self-reporting requirements” when finding fraud, serious violations or other deficiencies with loans, according to the Justice Department. If a loan is approved by a direct endorsement lender, but later defaults, the loan’s holder can make an insurance claim to HUD to cover losses. Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, had this to say:
Mortgage lenders that participate in the FHA insurance program must follow the requirements intended to safeguard its integrity and to protect homeowners. We will continue to hold responsible lenders that knowingly violate these important requirements.
As part of the settlement, Regions acknowledged it failed to follow several federal guidelines from Jan. 1, 2006, to Dec. 31, 2011. Federal authorities said that as a result, the U.S. government insured hundreds of loans approved by Regions that were not eligible for FHA mortgage insurance. HUD subsequently incurred substantial losses when it paid insurance claims on those loans, authorities said.
Sources: U.S. Department of Justice and Associated Press
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