American Financial Network to pay $1 million fee to resolve fraud allegations

Direct lender based in Brea, CA American Financial Network will pay approximately $1.04 million to resolve allegations that he fraudulently originated government-guaranteed mortgages insured by the Federal Housing Administration (FHA).

The settlement agreement announced by the United States Attorney for the Eastern District of Washington terminates a joint investigation by the U.S. Attorney’s Office for the Eastern District of Washington on Tuesday, US Department of Housing and Urban Development (HUD), and the US Department of Veterans Affairs after a former AFN loan processor filed a lawsuit against the California lender in March 2019.

The whistleblower claimed that the AFN knowingly underwrote certain FHA mortgages and approved certain mortgage insurance that did not meet FHA requirements or qualify for insurance between December 2011 and March 2019. AFN knowingly failed to perform the quality control reviews it was required to conduct, the former AFN Loan Processor alleged. The AFN did not respond to requests for comment.

“Quality, affordable housing is a critical issue in eastern Washington and across the country,” U.S. Attorney Vanessa Waldref said in a statement. “By inappropriately creating ineligible mortgages, lenders are taking advantage of limited FHA program resources and unfairly passing on the risk of loss to the public.”

The AFN, which has participated in the FHA Direct Approval Program since at least 2011, is responsible for carefully underwriting the mortgage to ensure it meets all FHA requirements, according to the U.S. Attorney’s Office. . Once a mortgage loan is FHA insured, the lender who holds the mortgage note can submit a claim for insurance benefits to the FHA to cover its losses if the borrower defaults or is unable to repay the mortgage. .

When a whistleblower or “reporter” files a lawsuit, the United States investigates the allegations under the False Claims Act and chooses to step in and resume the action or decline to step in. and allow the parent to pursue the allegation on behalf of the US

“Investigations like these help preserve the integrity of the home loan approval process and protect vulnerable veterans from fraudulent lending practices,” said Jason Root, Special Agent in Charge of the Department of Veterans Affairs office. from the Northwest Inspector General’s field office in a statement.

The AFN has not admitted any wrongdoing. Pursuant to the settlement agreement, the former AFN loan processor will receive over $228,172 of the settlement proceeds and will recover attorneys’ fees, expenses and costs.

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