Reverse mortgage servicer, once owned by Treasury head, to pay $89 million penalty

by Ryan Smith18 May 2017
A unit of the bank once run by the secretary of the Treasury will pay more than $89 million to settle a Justice Department probe into alleged violations of the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

The Justice Department announced the settlement with Financial Freedom, a mortgage servicer owned by OneWest. As a private citizen, Treasury Secretary Steve Mnuchin and partners formed OneWest, and Mnuchin served as its chairman. He sold the bank in 2015.

During his Mnuchin’s confirmation hearings, Democrats tried to use his leadership of the bank – described as a “foreclosure machine” – against him. They also claimed that Financial Freedom was responsible for a disproportionately high rate of foreclosures on reverse mortgages during Mnuchin’s tenure. Although Mnuchin was eventually confirmed, the Justice Department continued to probe Financial Freedom.

According to the DOJ, Financial Freedom failed to meet various FHA deadlines related to appraisal of properties, submission of claims to HUD and the pursuit of foreclosure proceedings on reverse mortgages. It then allegedly tried to obtain insurance payments for interest from the FHA despite the fact that it wasn’t eligible to receive the payments due to the missed deadlines.

“The Department of Justice is committed to ensuring that those who participate in federal mortgage insurance programs comply with requirements essential to the success of its programs,” said Acting Assistant Attorney General Chad A. Readler. “Among these requirements are the deadlines imposed by the Federal Housing Administration on those who service government-insured mortgages. Those deadlines are designed to protect the government’s collateral and stop the unnecessary loss of government funds and resources.”

Financial Freedom allegedly collected insurance payments it wasn’t entitled to between 2011 and 2016.

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