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We audited EverBank’s Preforeclosure Sale Program because it had the highest Florida preforeclosure sale claims of all servicing lenders located in Florida and more than 50 percent of its Florida Federal Housing Administration (FHA) claims were from preforeclosure sales with more than $12.9 million paid from 2011 through 2013.  Our objective was to determine whether EverBank properly determined that mortgagors were eligible to participate in FHA’s Preforeclosure Sale Program.

EverBank did not properly determine that mortgagors were eligible to participate in FHA’s Preforeclosure Sale Program in accordance with HUD requirements.  EverBank did not adequately (1)  assess the mortgagors’ financial information to ensure that it properly determined the mortgagors’ default was due to an adverse and unavoidable financial situation, (2) assess the mortgagors’ ability to pay the FHA-insured mortgage and (3) substantiate that the mortgagors’ need to vacate the FHA-insured property was related to the cause of default.  This condition occurred because EverBank’s interpretation of the program requirements that it adopted to qualify the mortgagors for the program was not in accordance with HUD requirements.  As a result, the FHA insurance fund paid nearly $1.6 million in improper claims for 11 preforeclosure sales, including lender and mortgagors incentives.

We recommend that the Deputy Assistant Secretary for Single Family Housing require EverBank to (1) reimburse the U.S. Department of Housing and Urban Development (HUD) for the 11 ineligible preforeclosure sale claims totaling $1,567,518 and (2) develop and implement policies and procedures in accordance with HUD requirements to properly determine mortgagor eligibility for the program.