The company is accused of improperly underwriting Home Equity Conversion Mortgages (HECM) insured by the Department of Housing and Urban Development (HUD) through its Federal Housing Administration (FHA).
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James B. Nutter & Company, a former mortgage lender, has reached a $2.4 million settlement to address allegations of violating the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The company is accused of improperly underwriting Home Equity Conversion Mortgages (HECM) insured by the Department of Housing and Urban Development (HUD) through its Federal Housing Administration (FHA).
“This case sought to redress serious violations of FHA requirements that posed a risk to the HECM program,” said HUD General Counsel Damon Smith. “HUD will continue to protect the integrity of this important mortgage program that serves the interests of our nation’s senior citizens.”
The HECM program, designed for homeowners aged 62 and older, enables seniors to access the equity in their homes, allowing them to remain in their residences while having financial support through FHA-insured loans.
In a troubling case highlighted by Civil Beat, Elton Namahoe received an unexpected offer at his doorstep that would change his life. Representatives from a mortgage company proposed a reverse mortgage on his Big Island home, promising him access to the equity in his property, which he could use to support himself. With his only income coming from Social Security and faced with transportation challenges, Namahoe accepted the offer, which could provide him with up to $189,000.
“I believed them, I spent the money over the years paying bills and buying food.” Namahoe said in a court declaration.
However, five years later, Namahoe found himself homeless after the mortgage company, James B. Nutter & Co., foreclosed on his home. The company claimed that he failed to complete a $500 repair to a porch railing and carport roof as required in the mortgage agreement.
Nearly a decade later, the Hawaii Supreme Court has overturned the foreclosure, ruling that Nutter and its legal team committed fraud by misleading the court about the foreclosure process. The court found that the necessary steps for foreclosure had not been properly followed, bringing a measure of justice to Namahoe's distressing situation.
“The HECM program helps support our nation’s senior citizens by providing an additional source of funds to supplement their income,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division.
FHA-approved lenders are permitted to underwrite these loans without prior government review, under the condition that they adhere to the agency's strict requirements. In the event of a loan default, lenders can recover certain losses from the U.S. government.
However, they are obligated to ensure that only eligible mortgages receive FHA insurance.
This settlement concludes a lawsuit initiated in 2020, which alleged that James B. Nutter & Company knowingly breached FHA underwriting standards. The claims indicated that the company allowed inexperienced temporary staff to underwrite loans and submitted applications with falsified underwriter signatures, often before all necessary documentation was reviewed.
“This case and the resulting $2.4 million settlement demonstrate the HUD Office of Inspector General’s commitment to holding lenders accountable when they commit fraud against FHA mortgage programs designed to provide financial assistance to senior homeowners,” said Inspector General Rae Oliver Davis of HUD.
The investigation and settlement involved collaboration among several entities, including the Justice Department’s Commercial Litigation Branch, U.S. Attorneys’ Offices from Missouri and D.C., HUD, and HUD’s Office of Inspector General.
“No one is above the laws," says HUD's IG Rae Oliver. "Our office will continue to work with our partners at the Justice Department to investigate mortgage lenders who jeopardize the integrity of FHA mortgage programs.”
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