A settlement has been reached to resolve False Claims Act allegations against Regions Bank.
The allegations arose from a lawsuit that claimed Regions Bank knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.
On September 13, 2016, the Department of Justice announced that between January 1, 2006, and December 31, 2011 Regions certified for FHA insurance certain mortgage loans that did not meet certain HUD underwriting requirements regarding borrower creditworthiness. Additionally, during this time frame, Regions did not maintain a quality control (QC) program that fully complied with the requirements established by HUD. The Company's QC Department did not consistently review an adequate sample of FHA-insured loans. Furthermore, Regions’ QC Department identified deficiencies during the course of its loan review, Regions engaged in a pattern of “curing” QC findings by obtaining documentation that was not available to the underwriter at the time the loan was approved. As a result, the defect rate reported to senior management was understated. Regions also failed to review Early Payment Default (EPD) loans in accordance with HUD guidelines. Regions was required to review all loans that became 60 days past due within the first six months, the Company reviewed only those loans that became 90 days past due. Also, Regions did not fully adhere to HUD’s self-reporting requirements.
As a result of the Company's mishandling and oversight, HUD insured hundreds of loans approved by Regions that were not eligible for FHA mortgage insurance under the DEL program and that HUD would not otherwise have insured.
