HUD-OIG: loanDepot originated substandard FHA mortgages

Did not always meet HUD requirements

The Office of Inspector General of the U.S. Department of Housing and Urban Development found after a recent audit that loanDepot’s FHA-insured loans with down payment assistance gift funds and secondary financing did not always comply with HUD requirements.

The HUD-OIG audited loanDepot based on a referral from HUD’s Quality Assurance Division detailing a separate lender that originated Federal Housing Administration-insured loans containing ineligible down payment assistance gifts.

It selected loanDepot due to its high volume of loans with down payment assistance funds.

The audit found that loanDepot’s FHA-insured loans with down payment assistance gift funds and secondary financing did not always comply with HUD requirements.

As a result, it put the FHA insurance fund at unnecessary risk, including potential losses of $4.7 million for 53 loans with ineligible assistance and $29.9 million for a projected 339 loans that likely contained ineligible assistance.

This is equivalent to at least $25.4 million in potential losses for loans that could contain ineligible assistance and have a higher risk of loss in the first year.

Additionally, the HUD-OIG said loanDepot inappropriately charged borrowers $25,700 in fees that were not customary or reasonable and $46,510 in discount fees that did not represent the purpose of the fee.

Read on.

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