U.S. Bank to Pay $1.2M to Settle FHA Violations
Minneapolis-based U.S. Bank has agreed to pay $1.2 million to settle allegations that it did not comply with Federal Housing Authority (FHA) requirements in connection with 27 mortgage loans.
According to the U.S. Department of Housing and Urban Development (HUD), the bank's failure to comply with the requirements led to losses of more than $465,000.
U.S. Bank did not admit to any liability under the settlement, which was announced Friday.
The settlement stems from a 2006 audit by HUD's Office of Inspector General, which concluded that U.S. Bank failed to meet FHA underwriting standards for mortgage loans that were made in 2003 and 2004.
According to HUD, the FHA generally prohibits banks from including overdue principal, interest, and late charges in refinanced loans. But the audit found that U.S. Bank refinanced loans that included such prohibited items, among other violations of FHA underwriting requirements.
The audit also found that U.S. Bank submitted defaulted loans to HUD for late endorsement, which violates FHA requirements.
In an e-mailed statement, U.S. Bank said that the settlement relates to alleged errors in a “very small number of loans made in 2003 and 2004” and that it has no impact on homeowners.
“The audit found an extremely low error rate (less than one-half of 1 percent) and found the bank was in 'substantial compliance' with HUD's requirements with no significant weaknesses in the bank's internal controls,” the company said in the statement. “Since the audit, the bank has strengthened its quality control and compliance in numerous ways.”
U.S. Bancorp, the parent company of U.S. Bank, is Minnesota's largest bank-holding company with $308 billion in assets as of the end of 2010. U.S. Bank-which operates 3,069 banking offices in 25 states-is the fifth-largest commercial bank in the country.