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By: Damon Y. Smith
These changes represent a dramatic departure from the prior administration, which brought False Claims Act claims against lenders for submitting the certifications to be eligible for FHA programs while underwriting loans that they allegedly knew were not in compliance with FHA’s regulatory requirements. See, e.g., https://www.housingwire.com/articles/49337-quicken-loans-agrees-to-pay-325-million-to-resolve-fha-loan-allegations-with-doj. Because the False Claims Act liability allows for treble damages, some considered the risk of substantial liability to be too high for further participation in FHA’s single family programs. See https://www.wsj.com/articles/banks-fled-the-fha-loan-program-the-government-wants-them-back-11557417600.
If adopted, the new certification may lead to additional interest in FHA programs from lenders who curtailed or ended their participation because of the potential risks associated with the prior certification.
The Federal Register Notice can be found here.