May 21, 2011 by
Filed under Mortgage
U.S. Bank has agreed to pay $1.2 million to settle allegations that it failed to comply with Federal Housing Administration underwriting standards in connection with 27 mortgage loans that resulted in documented losses of $465,000.
The U.S. Department of Housing and Urban Development (HUD) announced the settlement Friday in Washington. The Minneapolis-based bank, which is FHA’s eighth-largest mortgage lender, did not admit any liability.
“FHA’s underwriting and endorsement standards exist to protect its insurance fund and every family hoping to sustain homeownership,” said Helen Kanovsky, HUD’s general counsel, in a prepared statement. “We expect our lenders to uphold those standards and we will hold them accountable when they don’t.”
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HUD’s Office of Inspector General conducted an audit in 2006 that found that U.S. Bank failed to meet FHA underwriting standards in connection with mortgage loans originated in 2003 and 2004.
HUD noted in its statement Friday that the FHA generally prohibits the inclusion of overdue principal, interest and late charges in refinanced loans; however, the audit found that in some cases, U.S. Bank had refinanced loans that included such prohibited amounts, among other underwriting violations.
The U.S. attorney’s office in Minnesota handled the settlement negotiations with the bank on HUD’s behalf.
Dan Browning 612-673-4493
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