Housing and Urban Development

HUD Announces Agency Efforts to Reduce Risk From Cash-Out Refinance Lending


On August 1, the U.S. Department of Housing and Urban Development (HUD) announced joint policy actions designed to reduce risk associated with cash-out refinance lending. The changes preserve homeowners’ ability to convert home equity to cash via a government-sponsored mortgage but also improves the risk profile of HUD’s housing finance programs. To address these concerns, the Federal Housing Administration (FHA) will lower its maximum loan-to-value (LTV) requirements for cash-out refinance transactions from 85 percent to 80 percent. This policy change will be effective for loans with case numbers assigned on or after September 1, 2019 and aligns with the maximum cash-out LTV allowed by the Government Sponsored Enterprises (GSEs). Release.

Government Sues Allied Home Mortgage For Fraud Under the False Claims Act

On November 1, 2011, the United States filed suit in the Southern District of New York against Allied Home Mortgage, a mortgage lending company, for allegedly defrauding the government into insuring its now-defaulted loans. The complaint alleges that Allied and CEO Jim Hodge violated the False Claims Act (“FCA”) by making misrepresentations to the Department of Housing and Urban Development to ensure the company could continue originating mortgages insured by the Federal Housing Administration (“FHA”). The complaint alleges that Allied submitted loans to the FHA originated out of “shadow branches” it did not disclose to the government and then illegally routed those mortgages through HUD-certified mortgage branches to avoid detection by the government. The government also contends that Allied failed to implement sufficient quality control measures to ensure underwriting standards were being met. The government seeks a permanent injunction and treble damages. Complaint.