U.S. flag

An official website of the United States government Here’s how you know

The .gov means it’s official.

Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.

The site is secure.

The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.


The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), assisted the U.S. Attorney’s Office, Southern District of New York, in conducting a review of Flagstar Bank, FSB. The objective of the review was to determine whether Flagstar conducted its operations in the underwriting of Federal Housing Administration (FHA) loans in accordance with HUD-FHA regulations.

Flagstar Bank, FSB, is a supervised direct endorsement lender headquartered in Troy, MI. Since 1988, Flagstar has been a participant in the direct endorsement lender program, a Federal program administered by FHA. The direct endorsement lender program authorizes private-sector mortgage lenders to approve mortgage loans for FHA insurance. Lenders approved for the program must follow various HUD-FHA requirements and provide annual and per loan certifications that the lender complies with these requirements when underwriting and approving loans for FHA insurance.

However, Flagstar did not conduct its operations in the underwriting of FHA loans in accordance with HUD-FHA regulations. On February 24, 2012, Flagstar admitted, acknowledged, and accepted responsibility for submitting false certifications to HUD about the eligibility of its loans for FHA insurance. In a settlement reached with the U.S Attorney’s Office, the lender agreed to pay $132.8 million to the United States in damages and penalties under the False Claims Act and to reform its business practices. Flagstar admitted that during the period January 1, 2002, to February 24, 2012, it delegated underwriting decisions to unauthorized staff. The lender also admitted that it underwrote and approved for FHA insurance loans that did not comply with certain HUD-FHA underwriting requirements, and HUD paid insurance claims on these ineligible loans. Further, the U.S. Attorney’s Office announced that Flagstar set daily quotas for its HUD-approved underwriters and underwriting assistants and paid these employees substantial incentive awards for exceeding daily quotas.