Regarding Broker and Lender Quality Control Efforts…….

The Department of Justice (“DOJ”) just fined Guaranteed Rate $15 million dollars for knowingly violating best quality control practices as related to FHA and VA loans in particular. Please note, Fannie, Freddie, Ginnie, and the USDA are all very similar to FHA and VA requirements.

The DOJ alleged that Guaranteed Rate knowingly failed to comply with program rules that require lenders to maintain quality control programs to prevent and correct any deficiencies in underwriting, self-report any materially deficient loans they identify, and ensure that there are no conflicts of interest in the underwriting process.

As part of the settlement, Guaranteed Rate admitted that it had not adhered to self-reporting requirements, that its FHA underwriters received commissions and gifts – a violation of program rules – and that its government underwriters were sometimes instructed not to review documents that were relevant to their underwriting decisions.

The lender also admitted that it certified loans that weren’t eligible for FHA mortgage insurance or VA guarantees, and that HUD and the VA would not have guaranteed or insured those loans otherwise.

We see this all the time. Lender tells underwriter to look away, then loan goes bad, lender tries to put it back to broker. We also see processors paid when loans fund, not for processing whether loans fund or not. To pay only when loans fund, is to create a conflict of interest such as referenced above.

If any of you have questions, reach out to me at

That’s it for now. Stay safe.

Nelson A. Locke, Esq.

(800) 656-4584