Florida Real Estate News | $1Billion in False Claims for Pre-Foreclosure
Has The HUD Rewarded $1 Billion In False Claims?
A new report confirms that the United States government could have rewarded hundreds of millions of dollars in mortgage assistance to distressed homeowners who may have not actually been eligible. The inspector general from the Department of Housing and Urban Development stated that the firm didn’t properly administer the terms for its Pre-foreclosure Sale Program.
This agency uses government funding to compensate the balance for distressed homeowners that are forced to sell their homes for less than the amount owed on their mortgages. This program was in effect from September 2010 until August 2011 and rewarded more than $1.7 billion in claims to close on 20,000 homes.
In order to become eligible for the program, the homeowner must have been in an inevitable financial disaster, still live in the home, and be able to validate that they didn’t have enough money to cover the monthly expenses. Shockingly, the inspector general from the Department of Housing and Urban Development analyzed 80 cases at random and realized that 61 of them didn’t qualify. According to the sample of randomly examined cases, the investigators projected that the Housing and Urban Development may have paid out over $1 billion in false claims for 11,693 cases that weren’t eligible for involvement in the program.
The inspector general of the Housing and Urban Development states that the agency didn’t have suitable controls to administer the requirements and that the terms of the program weren’t properly outlined. This lack of enforcement may have caused the Federal Housing Administration insurance fund to pay out the avoidable losses.
The estimate of the $1.7 billion loss measured in the audit does not signify the actual loss of the Federal Housing Administration but were calculated based on the random data sample. If the short sale option wasn’t available, a large portion of the loans may have fallen into foreclosure which would have resulted in larger insurance claims for the Federal Housing Administration.
Regardless of the non-enforcement of the terms of the program, the overall cost to the Federal Housing Administration fund is most likely lower than the amount mistakenly paid out in false claims. The auditor stated that it’s not unreasonable to believe that some of the loans may have been managed differently and some may have gone into foreclosure and developed into conveyance claims. The auditor also stated that it’s safe to assume that some of the loan applicants may have stemmed into no claims or smaller compensations if the terms were strictly outlined and enforced.
In close to all of the cases examined, expenses requested by the homeowner are higher than those confirmed by the lender. In most cases, lenders attained bank statements but didn’t confirm the expenses claimed by the homeowners. The Housing and Urban Development agency rewarded claims to 12 applicants that didn’t even occupy the homes they defaulted on and paid claims to 4 homeowners that possessed at least $5,000 in cash resources.
In order to deter similar situations in the future, the inspector general suggested that the Housing and Urban Development Agency do more to administer the terms and instruct lenders how to properly enforce and utilize this program in the future. Auditors recommended that the Housing and Urban Development agency oblige lenders to repay the Federal Housing Administration insurance fund for 6 false claims that account for $360,760 in losses.
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