HUD Fraud

The U.S. Department of Housing and Urban Development (HUD) is often the victim of fraud that can be pursued by qui tam relators under the False Claims Act. HUD Fraud can arise in the agency’s mortgage, grant, assistance and regulatory programs. These include HUD’s Section 8 housing choice voucher program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market; HUD’s guarantee of Ginnie Mae mortgage backed securities (MBS); and HUD’s Fair Housing and Equal Opportunity cases and decrees.

HUD Fraud can also arise from disaster and emergency relief in its Community Development Block Grant Program (CDBG). Under CDBG, HUD provides grants to cities, counties, and States to recover from Presidentially declared disasters. Disaster Recovery grants are often used to provide affordable housing to disaster victims. More than $27 billion has been appropriated recently for disasters, such as hurricanes (Katrina, Rita, Sandy), floods and wildfires.


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HUD Fraud

1. What kinds of HUD Fraud do you find in the Section 8 housing voucher program?

One form of actionable misconduct is when the Section 8 landlord charges an improperly high rent that is passed along to the Government. Another is when the landlord falsely qualifies renters as Section 8 voucher eligible, when they are not. And, a third is when a landlord does not maintain housing in a decent, safe and sanitary condition.

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2. There have been HUD Fraud whistleblower cases involving its Preforeclosure Sale Program, what are they about?

The Preforeclosure Sale Program is a HUD program that uses government aid to cover the shortfall for troubled homeowners who must sell their home for less than they owe on their mortgages (i.e., the homeowners are “under water”). The program ran from September 2010 to August 2011, paying more than $1.7 billion in claims on nearly 20,000 homes. To qualify, the homeowner must have faced an “unavoidable” financial crisis, been living in the home and proved that they did not have sufficient income to make monthly payments. HUD fraud may exist where there is a knowing false certification that these criteria have been met.

3. What is HUD’s Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program (“DEL program”)?

This is a program that delegates authority to participating private lenders to endorse mortgages for FHA insurance. HUD Fraud results where lenders submit false certifications to HUD, including false certifications that the lender was originating mortgages in compliance with HUD-FHA rules when in fact it was not. Another problem occurs when lenders falsely certify to HUD loans are eligible for FHA mortgage insurance when in fact they were not.

4. What would be an example of disaster relief HUD Fraud?

Submitting claims for payments for phony tenants or for tenants who did not live in assisted units during the relevant time period. Another example would be the knowing receipt of duplicate or multiple payments for the same person. A third source of HUD Fraud cases would be post-disaster procurement fraud.

5. Who investigates HUD Fraud allegations?

The Office of Inspector General, United States Department of Housing and Urban Development.


 



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