We are currently investigating claims that loanDepot of Foothill Ranch, California, failed to properly process and underwrite home mortgage loans backed by the U.S. Veterans Administration. Bad underwriting often results in higher than average default rates. When that happens, both taxpayers and veterans lose.
loanDepot is a relatively new player in the mortgage industry. According to its website, the company was founded in 2010. Despite its young age, the company has been quite aggressive in its underwriting and as of last year, was the 7th largest underwriter of VA loans. The U.S. Veterans Administration says that in 2015, loanDepot wrote 12,238 VA home loans worth $3.5 billion. That is just 2% of the total VA loans written last year but loanDepot is consistently one of the fastest growing underwriters.
With over 5200 employees and 1700 licensed loan officers, we expect that loanDepot will continue to grow at a rapid pace. Unfortunately, we worry that their growth has been partially fueled by underwriting bad loans. And we are not alone in our fears.
Defaults by veterans in VA backed loans are actually quite low. Write thousands of loans, however, and there are bound to be some bad ones. From what our client tells us, the bad loans are not accidental.
Exactly one year ago, HUD released an audit of loanDepot’s FHA underwriting practices. According to that audit,
“loanDepot’s FHA-insured loans with downpayment assistance gift funds and secondary financing did not always comply with HUD requirements, putting 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. Looking forward 1 year, 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. Also, 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. The ineligible loans put borrowers at a disadvantage due to higher monthly mortgage payments imposed on them resulting from a premium interest rate.”
In layman’s terms, HUD found that borrowers were paying too much and taxpayers were at risk because of higher anticipated loan defaults.
According to a report in the industry publication Housing Wire, loanDepot disagreed with the findings and said, “We disagree with the report’s conclusions and believe the loans referenced in the reports complied with HUD regulations and guidance regarding DPA [down payment assistance] programs. We believe that HUD-OIG’s position is at odds with the opinion and guidance of HUD itself on this matter.”
loanDepot and VA Lending
We believe that Loan Depot also violated underwriting guidelines with respect to its VA lending business. In fact, those violations may be ongoing.
To assist in our review and investigation, we wish to speak with any veterans who have obtained Loan Depot loans during the last 6 years. We also wish to speak with any “insiders” – that means loan reps, underwriters, quality control and compliance professionals and the like. Confidentiality is assured.
Our military men and women have sacrificed much simply we can enjoy our freedom and security. Some have sacrificed everything. Our mission is to protect both taxpayers and our freedom fighters them from predatory and improper underwriting practices. If you financed through the company or worked there, we ask for a few minutes of your time.
[Update] Our investigation in LoanDepot regarding VA IRRRL loans is currently closed. The VA in 2019 published new underwriting rules for these loans. Of course, we are always interested in hearing about other lender misconduct. If you have something to report, please write to us at [hidden email]. We also wish to speak to past or present underwriters and loan officers.
Thank you (and to our veterans, thank you for your service).
The whistleblower lawyers at MahanyLaw help empower bank and mortgage professionals stop fraud and greed. We also defend our whistleblower clients from retaliation and have helped our clients win over $100 million in whistleblower awards in the last 5 years.
MahanyLaw – Protecting Veterans and Taxpayers – We Are America’s Whistleblower Lawyers
(NOTE: We are also investigating similar VA mortgage underwriting claims against Freedom Mortgage. Click here for more information on this investigation.)