Freedom Mortgage to pay $113M settlement
Freedom Mortgage Corp., of Mount Laurel, agreed to pay $113 million to settle allegations that from 2006 through 2011 it certified hundreds of mortgages for Federal Housing Administration insurance that did not qualify, Paul J. Fishman, the U.S. attorney for the District of New Jersey, said Friday.
Freedom Mortgage Corp., of Mount Laurel, agreed to pay $113 million to settle allegations that from 2006 through 2011 it certified hundreds of mortgages for Federal Housing Administration insurance that did not qualify, Paul J. Fishman, the U.S. attorney for the District of New Jersey, said Friday.
Mortgage companies authorized to certify home loans for the federal loan insurance - designed for borrowers who cannot afford a large down payment - are required to monitor loans for defaults within the first six months.
The settlement also alleges that Freedom did not perform that analysis to the extent required.
Even when it did - finding a default rate of more than 30 percent between 2008 and 2010 - the company allegedly did not report any defective loans to the U.S. Department of Housing and Urban Development, which oversees the FHA program.
In 2012, when Freedom allegedly found hundreds of defective loans, it reported just one to HUD, the U.S. attorney said.
"This recovery on behalf of the Federal Housing Administration should serve as a reminder of the potential consequences of not following HUD program rules," the agency's inspector general, David A. Montoyam, said.
Freedom Mortgage, which was founded in 1990 by Stanley C. Middleman and is among the largest U.S. mortgage lenders, admitted no liability.
"In order to avoid the extended distractions and expenses associated with protracted litigation, Freedom Mortgage made a business decision to resolve this matter," said Freedom spokeswoman Audrey C. Shapiro.
The settlement does not prevent Freedom from making FHA loans.
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