Mortgage lender Guaranteed Rate Inc. has agreed to pay a $15 million fine to resolve allegations it failed to properly and adequately underwrite federally backed loans, the Department of Justice announced.
DOJ said Guaranteed Rate “knowingly failed to comply with material program rules that require lenders to maintain quality control programs to prevent and correct underwriting deficiencies, self-report any materially deficient loans that they identify, and ensure that the underwriting process is free from conflicts of interest.”
Guaranteed Rate said in a statement that the company “worked with the DOJ to identify some mistakes and made the necessary improvements to our operations.”
“Guaranteed Rate is committed to doing the right thing and serving the needs of our customers,” the company said. “We come from a good place. We always have. Mortgage lending is a complicated and highly regulated business, and government lending guidelines are especially complex. In this matter, the DOJ helped us identify some issues that had already been corrected or were immediately corrected once identified. At no time did any audit review highlight any of these issues previously. We never intentionally violated any guidelines, that’s just not who we are.”
The allegations center around activities dating back to 2008 and have since been resolved, DOJ said in a news release.
DOJ said the company admitted to not adhering to self-reporting requirements, that its FHA underwriters improperly received commissions and gifts, and that there were instances in which its government underwriters were instructed not to review documents that were relevant to the underwriting decision.
Chicago-based Guaranteed Rate also acknowledged that it certified and the government insured and guaranteed loans that were not eligible for FHA mortgage insurance or VA loan guarantees and that HUD and VA would not otherwise have insured or guaranteed the loans.
“Lenders participating in mortgage programs backed by taxpayers must follow rules designed to protect both program integrity and homeowners,” U.S. Attorney Grant C. Jaquith for the Northern District of New York said. “Today’s settlement holds Guaranteed Rate accountable for its past violations and reflects that it has strengthened its internal controls to ensure future compliance with Federal Housing Administration and Department of Veterans Affairs requirements.”
Guaranteed Rate made it clear in its statement that the company disagreed with DOJ’s approach to the case.
“The statement from the DOJ feels dangerous to us. We have always operated with a customer-first approach, and a commitment to doing the right thing by adhering to all guidelines and regulations. We believe most of our peers in the industry do the same. Scenarios just like these have driven many lenders away from operating in this space, leaving the rest of us operating from a position of fear. This results in fewer options for customers, not more.
“Our relationship with HUD has always been positive, but we want to build a stronger relationship with their team, as we want to be an even better partner. We’re grateful for the cooperative process we engaged in together to resolve this matter.”