Reverse Mortgage Solutions, Inc., Settled Alleged Violations of Federal Housing Administration Loan Requirements Related to Home Equity Conversion Mortgages

Date Published: 
Monday, September 28, 2015
Publication/Report Type: 
Memorandums
Memorandum Number: 
2015-CF-1808
Program Area(s): 
Single Family Housing
State: 
Texas
Summary: 

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), assisted in an investigation into alleged violations by Reverse Mortgage Solutions, Inc., of Federal Housing Administration (FHA) regulations related to its Home Equity Conversion Mortgage (HECM) program.  The investigation began due to a qui tam filed under the False Claims Act, 31 U.S.C. (United States Code) 3729, in the U.S. District Court for the Middle District of Florida.  The False Claims Act allows private persons to file suit for violations of the False Claims Act on behalf of the Government.  A suit filed by an individual on behalf of the Government is known as a qui tam action, and the person bringing the action is referred to as a relator.

Reverse Mortgage Solutions is a mortgage company authorized to originate and service FHA-insured HECM loans (commonly known as reverse mortgages).  Reverse Mortgage Solutions is a wholly owned subsidiary of Walter Investment Management Corporation, with its operations based in Spring, TX.  Reverse Mortgage Solutions conducts loan servicing activities for reverse mortgages.  HUD’s HECM program enables qualified homeowners to withdraw a portion of the home’s equity, thus creating a reverse mortgage.  On July 1, 2013, the relator filed a qui tam action alleging that Walter Investment Management Corporation, Reverse Mortgage Solutions, and other entities engaged in a scheme to defraud HUD by failing to disclose in FHA insurance claims that certain required servicing actions on reverse mortgages were not completed according to HUD regulations within the required timeframes.  The relator also alleged that Reverse Mortgage Solutions used a straw corporation to keep commissions on the sale of properties it liquidated. 

On March 27, 2015, the United States intervened (joined) in the relator’s civil action regarding certain allegations made by the relator.  In joining the civil action, the United States contended that it had certain civil claims against Reverse Mortgage Solutions and the other defendants for violating program rules and that as a result, HUD paid more in claims on the loans than loan owners were entitled to receive on certain claims.  On September 3, 2015, the United States, the relator, Walter Investment Management Corporation, and the other defendants entered into a settlement agreement to avoid the delay, uncertainty, inconvenience, and expense of litigation.  To settle the matter, Walter Investment Management Corporation, the parent corporation of Reverse Mortgage Solutions, agreed to pay $29.63 million to the United States, covering certain claims.  The settlement agreement was neither an admission of liability by the defendants nor a concession by the United States that its claims were not well founded.  The FHA insurance fund is to receive more than $13.69 million of the $29.63 million, with the remaining funds being remitted to the relator and other Federal entities. 

We recommended that HUD’s Office of General Counsel, Office of Program Enforcement ensure that HUD records the $13,693,035 settlement to recognize funds due and as return of an ineligible cost.

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