HUD OIG Touts Investigative, Auditing Successes

The Department of Housing and UrbanrnDevelopments Office of Inspector General (HUD-OIG) has submitted its semi-annualrnreport of its activities to Congress. rnThe mandated report covers the period October 1, 2013 to March 31, 2014.</p

Inspector General David A Montoya saidrnhis agency conducted 44 audits over the six month period.  These audits resulted in $34 million inrncollections and more than $1.1 billion in funds “put to better use.” It also questionedrncosts of more than $125 million.</p

Montoya said OIG’s audit andrninvestigative work continues to target HUD’s high risk areas, especially civilrnfraud in single family programs.  New lenderrnorigination and underwriting practices are being aggressively reviewed and OIGrncontinues to work closely with the Department of Justice, various U.S.rnAttorneys’ offices and HUD’s Office of General Counsel.  </p

OIG’srninvestigations during the period resulted in $48.5 billion in restitution andrnjudgments, $23.8 million in recoveries and receivables.  Audits and investigations also resulted in 189rnindictments and informations, 267 convictions and 149 arrests.</p

One of HUD’srnpriorities has been Superstorm Sandy recovery efforts.  OIG has been working with HUD disaster staffrnto ensure that the lessons learned from previous disasters will inform approvalrnof grant recipients’ disaster plans and HUD guidance.  During the reporting period OIG’srninvestigative unit opened 36 investigations and conducted 17 outreach sessionsrnwith grantees and administrators of Sandy funds in the New York and New Jerseyrnarea.</p

Another focus ofrnactivity has been civil fraud, particularly with regard to mortgages andrnespecially as related to the FHA loan insurance fund.  One notable outcome, Montoya said, was the settlementrnreached, in cooperation with other federal agencies, with JPMorgan Chase totalingrn$614 million of which $564.4 million directly relates to FHA loans.  </p

As part of itsrn2014 strategic plan OIG identified nine initiatives are among the mostrntroublesome problems that are frequently encountered by both investigative andrnaudit staff.  A joint working group hasrnbeen established to look for root causes of these problems which include FHArnappraisals and high risk appraisers, HUD’s REO program, oversight of communityrnplanning and development programs, review of lender oversight, and pre-foreclosurernsales. </p

OIGsrninvestigations within its single family housing unit resulted in 42rnadministrative actions, 116 convictions, pleas, or pre-trial diversions, andrn$8.7 million in recoveries.  The reportrnoutlines many of its cases to illustrate its investigative successes in variousrnsingle family areas.  </p

The owner of U.S.rnMortgage Bailout, an alleged foreclosure rescue company, was sentenced to 60rnmonths in jail, three years supervised release and required to pay $1.4 millionrnin restitution following a guilty plea to mail and wire fraud, money launderingrnand bankruptcy fraud.  The owner hadrncollected money from thousands of distressed homeowners, promising to providernassistance in obtaining loan modifications and claiming a 97 percent successrnrate.  </p

The formerrnassistant manager of Madison Funding received a 16 month jail sentence forrnconspiracy and false statements to HUD in obtaining FHA insurance.  The loan originator submitted loanrnapplications containing false information often supported by falsified, forged,rnand altered documents.  The eight FHArnmortgages affected by the scheme resulted in losses to the agency of $111,000.</p

Two owners ofrnconstruction companies were ordered to pay more than $1.2 million inrnrestitution, nearly half of that to HUD, after guilty pleas in connection withrna flipping scheme.  The owners recruitedrnstraw buyers to purchase homes at inflated prices submitting falserndocumentation to lenders to secure more the $837,000 in mortgage loans.  The two also received sentences of 18 monthsrnin jail and three year’s supervised release.</p

Perhaps the mostrninteresting conviction was that of a sovereign citizen who used a foreclosurernrescue scheme as a way to recruit new members to her movement.  The sovereign citizen was found guilty of 13rnfelony counts for defrauding struggling homeowners whom she had promised tornaccess a “secret” stash of Federal money to eliminate their debt whilerninstructing them to stop paying on their mortgage and other debt.  In exchange for her help the homeowners werernrequired to join the sovereign citizen program run by the woman and her father.

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