Lennar manipulated data so borrowers could qualify for home mortgages: whistleblower lawsuit

A mortgage lending subsidiary of homebuilding giant Lennar has been hit with a whistleblower suit, alleging it provided loans to unqualified borrowers and manipulated borrower data to ensure approval.

Wanda Burling, a former senior quality control manager at Clearwater-based Eagle Home Mortgage, claims the company omitted mortgage borrowers’ debts, made it appear the borrowers had more money than they did and misled borrowers about appraisal costs.

When she reported the alleged violations, her supervisor warned she could lose her job, and be “blackballed from the mortgage industry,” according to the suit. She was fired in March 2017.

Eagle and Miami-based Lennar are named as defendants in the lawsuit, which was filed in late November, in Pinellas County Circuit Court, just outside Tampa. The Tampa Bay Times first reported the news about the litigation.

The lawsuit claims that the misconduct began in September 2016, when Burling received calls from an elderly borrower, who had a secured a reverse mortgage with Eagle. The borrower told Burling that he had paid an Eagle loan originator for the cost of the loan appraisal, then was told he had to pay more.

According to the lawsuit, the borrower’s application was never completed properly, and he was never sent required disclosures about the loan. Burling also claims the loan originator took funds by the originator before he signed an agreement to proceed. The same loan originator was banned from originating mortgages in the state of New York, according to the complaint.

Josh Migdal, a partner at the Miami law firm Mark, Migdal & Hayden, said “it isn’t surprising in a slow housing market, that there would be misrepresentations related to borrower quality.” Migdal is not involved in the case.

This isn’t the first time Lennar’s mortgage arm has faced scrutiny for its lending practices. In October, Universal American Mortgage Company — which is connected to Eagle — agreed to pay the government $13.2 million to resolve allegations it violated the False Claims Act from its Federal Housing Administration mortgages. Those alleged violations happened between 2006 and 2011.

Among the other allegations, Burling said the loan originator, appraiser and loan processor were all related to each other. The loan originator allegedly provided a reference for the appraiser and never disclosed that relationship to the borrower.

These individuals were manipulating data to qualify and approve the loans, according to the filing. Burling said originators would add reserves to make it appear as though the borrower had more funds than the person actually had. The loan originators would also omit a debt the borrower had or add income from a part-time job to increase the likelihood that the borrower would be approved for a loan, according to the suit.

When Burling told management about some of these claims, they told her to ignore the violations and to not contact the Federal Housing Administration or Veterans Affairs, according to the suit. She was fired for “poor job performance,” according to the suit. Burling is seeking backpay and benefits, among the damages.

Lennar became the country’s largest homebuilder after it acquired CalAtlantic in a deal worth $9 billion last year. Today, homebuilders across the country are struggling, due to rising mortgage rates and higher construction costs, which have made homeownership too expensive for many Americans.