Venta Financial Group, Inc., Las Vegas, NV, Improperly Originated FHA-Insured Loans With Restrictive Covenants

Date Issued: 
Wednesday, September 20, 2017
Publication/Report Type: 
Memorandums
Memorandum Number: 
2017-LA-1801
Program Area(s): 
Single Family Housing
State: 
Nevada
Summary: 

We audited Venta Financial Group’s Federal Housing Administration (FHA) loan origination because it was one of the top lenders that originated FHA-insured loans with downpayment assistance from the City of Las Vegas.  A previous U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG) audit (Evergreen Home Loans, 2016-LA-1011) found that Evergreen originated FHA-insured loans in connection with the City of Las Vegas’ downpayment assistance program that contained prohibited legal restrictions on conveyance. 

Venta improperly originated FHA loans for nine properties that contained prohibited restrictive covenants.  This condition occurred because Venta did not have adequate policies and procedures in place to identify the prohibited restrictive covenants.  As a result, Venta placed the FHA fund at unnecessary risk for potential losses of $418,277. In addition, HUD paid claims on two of the nine loans, resulting in actual losses of $5,482.

We recommend that the Deputy Assistant Secretary for Single Family Housing require Venta to (1) work with HUD to nullify the restrictions on conveyance that violate HUD policy or indemnify HUD against future losses of $418,277 for the eight loans; (2) repay HUD $5,482 for partial claims paid on two FHA loans that contained prohibited restrictive covenants; (3) develop and implement policies and procedures to identify prohibited restrictions on conveyance to ensure that it does not originate FHA loans with prohibited restrictive covenants; (4) provide training to its employees regarding HUD’s requirements related to prohibited restrictions on conveyance.  We also recommend that HUD’s Associate General Counsel for Program Enforcement pursue civil and administrative remedies, if legally sufficient.

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