Mortgage Investors Corporation: When the Title Charge Conceals the Attorney Fee

In the Mortgage Investors mortgage fraud case, two mortgage brokers alleged that Mortgage Investors Corporation hid prohibited attorney closing fees inside permitted title charges and falsely certified compliance to obtain VA loan guaranties. The alleged scheme connected what veterans paid at closing to what the lender told the Department of Veterans Affairs. If you know what went into a title charge or who approved the certification, you may recognize the difference the closing form concealed.

This page follows those fee certifications, the VA’s obligation to later loan holders and the February 17, 2021 decision that sent the case back for further proceedings. Our mortgage whistleblower questions connect the wider range of loan files, government programs and evidence an insider may know.

What Did Mortgage Investors Certify About VA Closing Fees?

Mortgage Investors certified that it had not imposed impermissible fees on veteran borrowers, according to the Eleventh Circuit’s account of the case. That certification was required before the VA would issue a loan guaranty. The brokers alleged that the company obtained federal backing by certifying compliance while hiding charges the program prohibited.

The loans were Interest Rate Reduction Refinance Loans, commonly called IRRRLs. The program was designed to help veterans stay in their homes by refinancing existing VA-backed mortgages on more favorable terms. Its fee limits served that purpose by restricting what lenders could collect from veterans during the refinancing.

The opinion describes a familiar closing sequence. After approving a loan, the lender gave instructions to the attorney or title company handling the closing. The lender or its agent prepared the HUD-1 settlement statement, breaking out closing costs and fees, and the lender was required to review it for accuracy before closing. Afterward, the lender sent the HUD-1 and its fee certification to the VA.

The alleged concealment happened inside those entries. Reasonable and customary title examination and title insurance charges were permitted, but attorney closing fees were not among the allowed itemized charges described by the court. The brokers alleged that Mortgage Investors combined the prohibited attorney fees with the permitted title fees on a single HUD-1 line. The certification then represented that the borrower had paid only permitted charges.

In the brokers’ account, we see a lender certifying its own disguise. If you work in closing or fee review, you may know what the invoice actually covered. The fee acquired a better name.

Why Does VA Keep Paying a Holder?

VA must honor an issued loan guaranty held by a legally protected purchaser even when the originating lender’s fee practices are in question. In the arrangement described by the court, lenders obtained the guaranties and then sold the loans on the secondary market. Those protected purchasers had rights to payment that the originating lender’s alleged fraud did not erase.

That separation mattered to Mortgage Investors’ defense. The company argued that the VA kept paying claims despite knowing about fee violations, showing that the fee requirements did not matter to payment. The Eleventh Circuit explained that the VA’s legal obligation to the protected holders supplied another reason for those payments. The agency had to honor their guaranties and seek a remedy from the originating lender.

VA Audits Found Fees and Required Refunds

The VA’s audits had revealed Mortgage Investors’ fee violations by 2009, the court explained. Regional Loan Centers conducted spot audits of loan samples, while a separate VA monitoring unit conducted periodic onsite reviews. The resulting letters told Mortgage Investors that veterans had paid unallowable fees and directed refunds.

The opinion also describes the VA increasing the frequency and rigor of audits in 2010 and 2011. It began comparing lenders’ charges with mortgage-industry fee averages to identify possible bundling. The court said that change apparently proved ineffective, but it still showed an effort to detect the problem. The VA also consistently required refunds of improper fees it discovered.

Mortgage Investors argued that the VA could have taken stronger action against it. The Eleventh Circuit considered the agency’s refund demands and attempts to improve detection, even while it continued paying protected holders.

This is where an audit employee’s knowledge can add something the closing statement cannot. The finding, its recipient and the refund response show what the lender was told after the loan closed. We connect those later records to the original fee classification and certification to understand how the same charge traveled through the business.

What Did the February 17, 2021 Opinion Decide?

The Eleventh Circuit reopened the False Claims Act claim because the evidence could support a finding that the alleged false certifications mattered to the VA’s money. It reversed the ruling for Mortgage Investors and sent the case back to the district court.

The mortgage brokers had brought the qui tam case, a case on the government’s behalf, using knowledge from their work originating VA refinance loans. The government communicated with them but decided not to join the case. On the appeal, the government supported their argument that legally required payments to protected holders deserved little weight in deciding whether the fee certifications mattered.

The separate Carrington Mortgage Services case shows why the connection to government losses also matters. The Seventh Circuit found enough evidence for a jury on whether FHA certifications mattered, but Carrington won because the evidence did not adequately connect the alleged misrepresentations to HUD’s losses.

What Records Would Show the Fee Certification?

Itemized attorney and title invoices, closing instructions, the HUD-1 and the lender’s certification connect the service charged to the promise made to the VA. We compare those records for the same loan to see who described the fee, who reviewed it and what the company certified. Audit findings and refund records then show the later response to a charge the agency challenged.

The Mortgage Investors opinion makes the value of industry knowledge unusually clear. A HUD-1 already filed in another case appeared on its face to list permitted charges. One of the brokers used his knowledge of refinancing fees to recognize possible bundling in that form. The court distinguished what the form displayed from what someone familiar with the business could understand about the charges behind it.

If your question is how to report mortgage fraud involving a fee certification, we start with the part of that chain you know. Your account of the closing instructions, fee review or refund response helps us connect the records to the decision inside the lender.

What Can This Mortgage Fraud Case Teach an Insider?

The fee reviewer, closing employee and audit specialist may each know a different part of the account. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We assess how the fee and certification evidence you know could support that kind of case, including the recovery behind a potential mortgage whistleblower reward.

You Know What the Title Charge Included

If you know why an attorney fee appeared as a title charge, or what happened after the VA demanded a refund, speak to one of our Whistleblower Experts about the fee certification. We build the case around your understanding of the closing and certification decisions, bringing in mortgage fraud whistleblower lawyers who know VA lending. We remain your partners in building your strongest VA lending whistleblower case.