The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), assisted the U.S. Department of Justice, Washington, DC, and the U.S. Attorney’s Office, Eastern District of Michigan, in the civil investigation of United Shore Financial Services, LLC. United Shore is a Federal Housing Administration (FHA)-approved mortgage lender, with its principal place of business located in Troy, MI.
United Shore became an FHA-approved direct endorsement lender in March 1988. As a direct endorsement lender, United Shore was authorized by HUD to originate and underwrite mortgage loans on HUD’s behalf, including determining a borrower’s creditworthiness and whether the proposed loan met all applicable requirements. When a borrower defaults on an FHA-insured loan underwritten and endorsed by a direct endorsement lender, such as United Shore, the lender (or its representative) has the option of submitting a claim to HUD to compensate the lender for any loss sustained as a result of default. Therefore, once a mortgage loan is endorsed for FHA insurance, HUD insures the risk of the borrower’s defaulting on that mortgage, which is realized if an insurance claim is submitted.
On December 28, 2016, United Shore entered into a settlement agreement with the Federal Government to pay $48 million to avoid the delay, uncertainty, inconvenience, and expense of lengthy litigation of certain civil claims the Government stated it had against United Shore. As part of the settlement, United Shore agreed that it engaged in certain conduct in connection with its origination, underwriting, quality control, and endorsement of single-family residential mortgage loans insured by FHA. As a result of United Shore’s conduct, HUD insured loans approved by United Shore that were not eligible for FHA mortgage insurance under the direct endorsement program and that HUD would not otherwise have insured.