Troy-based mortgage lender reaches $48 million settlement over bad loans
A Metro Detroit-based mortgage lender has reached a $48 million settlement with the federal government.
Troy-based United Shore Financial Services was certified to make direct loans backed by the Federal Housing Administration’s mortgage insurance program.
But according to the U.S. Justice Department, USFS knowingly violated a number of FHA program rules, and signed off on hundreds of bad loans between 2006 and 2011—leaving taxpayers on the hook.
As part of the settlement, the company admitted that it “improperly pressured underwriters to approve FHA mortgages, and its compensation plan used a formula expressly tying underwriter compensation to the percentage of loans approved by the underwriter and closed by USFS. USFS also falsely certified that direct endorsement underwriters personally reviewed appraisal reports prior to USFS approving and endorsing mortgages for FHA insurance.”
And when the company’s internal quality control reviews “showed severe problems with FHA insured mortgages,” USFS failed to report them to either senior management or the U.S. Department of Housing and Urban Development, which manages and pays out FHA mortgage insurance.
“USFS acknowledged that it failed to comply with FHA underwriting and quality control (QC) requirements, resulting in improperly originated mortgages,” John W. Vaudreuil, U.S. Attorney for the Western District of Wisconsin, said in a statement. “While USFS deserves credit for acknowledging and resolving its conduct, that conduct not only resulted in substantial losses of public funds, but also put Wisconsin homeowners at risk of losing their homes or ruining their credit. This large settlement should send a clear message that such conduct will not be tolerated.”
The Michigan U.S. Attorney’s office, Eastern District, also participated in the joint investigation, along with HUD and the Justice Department.
The fast-growing USFS has more than 1800 employees, and its wholesale division has become the largest mortgage wholesaler in the U.S. A company spokesperson did not immediately respond to requests for comment late Wednesday.