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The ‘Good Ol’ Boy Group

A report from the Tampa Bay Times in Florida. “Homebuilding giant Lennar Corp. and its Clearwater-based mortgage subsidiary made loans to unqualified buyers and violated federal laws, a former employee alleges. In a lawsuit filed in Pinellas County Circuit Court, Wanda Burling says she repeatedly complained to a vice president at Eagle Home Mortgage about the company’s lending practices only to be warned to ‘let it go’ if she wanted to keep her job.”

“The same executive also said that given a choice between Burling and loan originators who ‘may or may not follow the rules,’ Eagle would always choose the originators as they are ‘producers’ for the company.”

“Burling, who was fired last year, is seeking back pay with interest and compensatory damages from Lennar and Eagle, formerly known as Universal American Mortgage Co.”

“Records show that Eagle has made thousands of mortgage loans in Hillsborough and Pasco counties. In December, the Justice Department reached a $13.2 million settlement with Eagle to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with FHA lending standards. It is not known whether Burling’s allegations factored into that case; she could not be reached for comment and her lawyers did not return calls.”

“In the suit filed under Florida’s whistleblower act, Burling, 64, said her job as a senior quality control manager was to review Eagle’s lending activities to ensure they complied with state and federal regulations. She said she became aware of problems in 2016, soon after she was hired, when an elderly man with a reverse mortgage complained that the loan originator had lied to him.”

“In checking, the suit says, Burling discovered that the man’s application was not properly completed and that he was never sent the disclosures of fees, costs or other information required under the federal Truth in Lending Act.”

“The suit also alleges: In at least four cases, the loan originator, the appraiser and the processor were related to one another. The originator would add ‘reserves’ to make it appear the borrowers had more funds then they did. The originator would also omit debts or add income from a part-time job the borrower no longer had. ‘All of these practices fraudulently increased the likelihood of the borrower being approved for the loan,’ the suit says.”

“In other cases, borrowers did not have enough money to qualify for loans yet received them anyway. Eagle and Lennar hid that from the federal government in violation of the False Claims Act, the suit says.”

“Any loans that Eagle pulled for audit were placed in a system called ACES. In order to hide negative findings, though, Eagle put the findings in the ‘notes’ section of the system as opposed to ‘reporting’ section. ‘This practice hid the findings from any government agency performing an audit,’ the suit says.”

“Burling said an Eagle vice president, Rebecca ‘Becky’ Moore, warned her not to contact federal authorities about compliance issues. Moore also told her that Eagle was known as the ‘Good Ol’ Boy group,’ that senior managers did not like strong women and that she ‘should be careful as they were after her.'”

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  2. ‘She said she became aware of problems in 2016, soon after she was hired…Records show that Eagle has made thousands of mortgage loans in Hillsborough and Pasco counties’

    Oh dear…

    1. It’s all fraud. This entire bubble can all be traced to fraud. People can’t afford these houses, so it’s back to liar loans.

  3. i thnk that this sort of passive fraud is happening all over the country.

    Inflating salaries on applications, implying size of bonus’es. It will be interesting to see if any thing happens from an enforcement standpoint

    1. ‘Any loans that Eagle pulled for audit were placed in a system called ACES. In order to hide negative findings, though, Eagle put the findings in the’notes’ section of the system as opposed to ‘reporting’ section. ‘This practice hid the findings from any government agency performing an audit’

      Now that’s some air tight audit procedures! Didn’t Senator Running Deer say this wasn’t gonna happen no more? Maybe she’s dropped the ball now that she’s taken up swillin’ beer on the internet.

      1. Ah, but there’s a new sheriff in town that’ll put this right. Maxine Waters has been named as the new head of the Financial Services Committee. With Maxine’s unblemished ethics record, reputation for incorruptibility, and long track record of safeguarding the public interest against bankster malfeasance, surely the scufflaws in the financial sector are quaking in their boots.

        Oh, wait….

        http://www.washingtonpost.com/wp-dyn/content/article/2009/03/13/AR2009031303551.html

  6. ‘In December, the Justice Department reached a $13.2 million settlement with Eagle to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with FHA lending standards’

    Here’s more on that from last year:

    Published Jan. 25, 2018

    “Lennar’s mortgage subsidiary is under investigation by the Department of Justice over underwriting related to Federal Housing Administration loans, the major U.S. homebuilder disclosed Thursday.”

    “Federal investigators have subpoenaed records “regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration loans originated and sold in prior years,” Lennar said in its annual report filed with the Securities and Exchange Commission.”

    “The FHA provides mortgage insurance on loans for single-family, multifamily and manufactured homes that are granted by approved lenders nationwide. Borrowers typically may qualify for an FHA loan with a down payment as low as 3.5%, depending on their credit score.”

    “Government prosecutors in some cases have alleged that lenders approved unqualified borrowers for FHA loans that subsequently went bad — costing the federal government millions of dollars in insurance costs. Detroit-based Quicken Loans is currently battling one such lawsuit.”

    https://www.usatoday.com/story/money/2018/01/25/department-justice-investigates-homebuilder-lennars-mortgage-subsidiary/1064816001/

    1. ‘In December, the Justice Department reached a $13.2 million settlement with Eagle to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with FHA lending standards’

      The government simply takes their cut and the fraud goes on.

      1. April 30, 2015

        A federal judge in Charlotte sentenced a former Beazer Homes USA executive to 10 years in prison on Thursday for his role in a long-running accounting scheme at the Atlanta-based homebuilder.

        Michael Rand, the company’s former chief accounting officer, could have faced life in prison, but prosecutors recommended a sentence of no more than 15 years. Rand’s attorney asked for five years before U.S. District Court Judge Robert Conrad made his ruling after a daylong hearing.

        “Illegality became the norm in this company,” Conrad said from the bench. “I’m convinced the defendant knew what he was doing was wrong.”

        The sentencing was the latest in a legal drama that began with Rand’s indictment in 2007 and included two jury trials. The federal investigation into the company followed a series of Observer stories focusing on Beazer practices that broke federal lending laws and put hundreds of Charlotte-area residents into homes they couldn’t afford.

        During the federal mortgage-fraud probe, prosecutors say Rand deleted some 6,000 emails, many of them incriminating. Beazer fired him in 2007. While the homebuilder amassed $389 million in profits in 2006, more than 13 percent of its Mecklenburg houses resulted in foreclosures, leaving behind wrecked families and ravished neighborhoods.

        Despite the damage, Rand is one of only two Beazer figures who have faced charges. Janette Parker, the manager of Beazer’s mortgage office in Charlotte, pleaded guilty to three counts of mortgage fraud in 2011. The company and its two top leaders avoided prosecution by paying back almost $60 million to the government and affected homeowners.

        Thursday’s hearing began with dueling experts testifying about the actual losses investors incurred when Beazer’s stock dropped in 2007 on various days when the company disclosed investigations of its accounting practices and mortgage operations. An expert for the defense said there were no discernible losses from Rand’s actions, while an expert for the government provided estimates that ran from $135 million to more than $1 billion, using various methodologies.

        Conrad settled on $135 million, but said an estimate of $250 million produced by one of the expert’s models was “probably more accurate.”

        https://www.charlotteobserver.com/news/business/article19954404.html#storylink=cpy

        I was blogging about this whole thing as it happened. The Charlotte Observer did an outstanding job breaking the story before criminal investigations started.

  7. In December, the Justice Department reached a $13.2 million settlement with Eagle to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with FHA lending standards.

    As usual, no criminal prosecution of the wrongdoers, tax-deductible, slap on the wrist fines amounting to a fraction of their ill-gotten gains, and “mistakes were made” pro forma mea culpas that absolve the perps of all future criminal liability.

    We won’t put an end to this kind of systemic fraud until we take an iron broom to the corrupt Justice Department and FBI, and start firing and locking up captured and complicit regulators and enforcers.

    1. One of the comments from the above post …

      “Adam Smith Engineer
      Jan 8, 2019 at 1:43 am
      I had a good conversation with a rwaltor friend today working in South Bay. He also confirmed that many people are holding off, even though they migh have money in the bank. He says many customers are spooked by the volatility in the stock market and they hesitate to sign the papers, because their incomes depend on the stock market. 5-10% daily moves up or down in Trillion dollar company stocks is not an easy thing to swallow.”

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