HUD’s FHA Lender Annual Certification Statements May Significantly Reduce FHA Lender Risk of False Claims Act Liability
By: Damon Y. Smith
- Broad certification language stating that the operations of the lender conformed to all HUD regulations and requirements;
- Acknowledgements that lenders are responsible for the actions of their employees, including loan underwriters and originators;
- General certifications that the lender is not under indictment for or convicted of offenses that reflect adversely on its integrity, competence or fitness;
- Certifications involving criminal misconduct on the part of lender staff, including mortgage underwriters and originators; and
- Certifications regarding compliance with the SAFE Act.
These changes represent a dramatic departure from the prior administration, which brought False Claims Act claims against lenders for submitting the certifications to be eligible for FHA programs while underwriting loans that they allegedly knew were not in compliance with FHA’s regulatory requirements. See, e.g., https://www.housingwire.com/articles/49337-quicken-loans-agrees-to-pay-325-million-to-resolve-fha-loan-allegations-with-doj. Because the False Claims Act liability allows for treble damages, some considered the risk of substantial liability to be too high for further participation in FHA’s single family programs. See https://www.wsj.com/articles/banks-fled-the-fha-loan-program-the-government-wants-them-back-11557417600.
If adopted, the new certification may lead to additional interest in FHA programs from lenders who curtailed or ended their participation because of the potential risks associated with the prior certification.
The Federal Register Notice can be found here.