The Department of Housing and Urban Developments Office of Inspector General (HUD-OIG) has submitted its semi-annual report of its activities to Congress. The mandated report covers the period October 1, 2013 to March 31, 2014.
Inspector General David A Montoya said his agency conducted 44 audits over the six month period. These audits resulted in $34 million in collections and more than $1.1 billion in funds "put to better use." It also questioned costs of more than $125 million.
Montoya said OIG's audit and investigative work continues to target HUD's high risk areas, especially civil fraud in single family programs. New lender origination and underwriting practices are being aggressively reviewed and OIG continues to work closely with the Department of Justice, various U.S. Attorneys' offices and HUD's Office of General Counsel.
OIG's investigations during the period resulted in $48.5 billion in restitution and judgments, $23.8 million in recoveries and receivables. Audits and investigations also resulted in 189 indictments and informations, 267 convictions and 149 arrests.
One of HUD's priorities has been Superstorm Sandy recovery efforts. OIG has been working with HUD disaster staff to ensure that the lessons learned from previous disasters will inform approval of grant recipients' disaster plans and HUD guidance. During the reporting period OIG's investigative unit opened 36 investigations and conducted 17 outreach sessions with grantees and administrators of Sandy funds in the New York and New Jersey area.
Another focus of activity has been civil fraud, particularly with regard to mortgages and especially as related to the FHA loan insurance fund. One notable outcome, Montoya said, was the settlement reached, in cooperation with other federal agencies, with JPMorgan Chase totaling $614 million of which $564.4 million directly relates to FHA loans.
As part of its 2014 strategic plan OIG identified nine initiatives are among the most troublesome problems that are frequently encountered by both investigative and audit staff. A joint working group has been established to look for root causes of these problems which include FHA appraisals and high risk appraisers, HUD's REO program, oversight of community planning and development programs, review of lender oversight, and pre-foreclosure sales.
OIGs investigations within its single family housing unit resulted in 42 administrative actions, 116 convictions, pleas, or pre-trial diversions, and $8.7 million in recoveries. The report outlines many of its cases to illustrate its investigative successes in various single family areas.
The owner of U.S. Mortgage Bailout, an alleged foreclosure rescue company, was sentenced to 60 months in jail, three years supervised release and required to pay $1.4 million in restitution following a guilty plea to mail and wire fraud, money laundering and bankruptcy fraud. The owner had collected money from thousands of distressed homeowners, promising to provide assistance in obtaining loan modifications and claiming a 97 percent success rate.
The former assistant manager of Madison Funding received a 16 month jail sentence for conspiracy and false statements to HUD in obtaining FHA insurance. The loan originator submitted loan applications containing false information often supported by falsified, forged, and altered documents. The eight FHA mortgages affected by the scheme resulted in losses to the agency of $111,000.
Two owners of construction companies were ordered to pay more than $1.2 million in restitution, nearly half of that to HUD, after guilty pleas in connection with a flipping scheme. The owners recruited straw buyers to purchase homes at inflated prices submitting false documentation to lenders to secure more the $837,000 in mortgage loans. The two also received sentences of 18 months in jail and three year's supervised release.
Perhaps the most interesting conviction was that of a sovereign citizen who used a foreclosure rescue scheme as a way to recruit new members to her movement. The sovereign citizen was found guilty of 13 felony counts for defrauding struggling homeowners whom she had promised to access a "secret" stash of Federal money to eliminate their debt while instructing them to stop paying on their mortgage and other debt. In exchange for her help the homeowners were required to join the sovereign citizen program run by the woman and her father.