Confidential Consultation

April 4, 1995 — The Charlotte Observer

First Union Mortgage Corp. has agreed to pay the government $6.3 million to settle claims that employees falsified loan forms and caused multi-million dollar losses under the Department of Veterans Affairs loan guarantee program.

The settlement, announced Friday, caps 2 years of negotiations between the U.S. Department of Justice and First Union and covers loans made in the mid to late 1980’s in Colorado Springs, Colorado, and Atlantic Beach, Florida.

Paul Scott, a trial attorney with the Justice Department, said Monday the VA’s losses from loan defaults totaled $4.2 million. Typically, taxpayers foot the bill on such losses.

“The VA noticed several years ago there were an inordinate number of defaults in the Colorado Springs area, and, more recently in Florida.” Scott said. “In investigating those defaults (Justice) discovered there were some questionable underwriting practices being used by First Union personnel.”

Key information about the borrowers’ income, debts, and number of dependents was misrepresented in loan forms, Scott said. In some instances, a loan officer never met with the borrower but instead collected information from sales staff of a developer, he said.

“As of now, we’re still looking at other defendants,” Scott said. Said Jeep Bryant, a First Union spokesman “We’re pleased to have reached this negotiated settlement to put the matter behind us.”

The settlement won’t affect earnings, Bryant said.

Scott said that a loan officer who was “significant” in the case was no longer with First Union Mortgage Corp., which is a subsidiary of Charlotte-based First Union. “This scheme involved only lower-level staff of First Union,” he said. “It didn’t involve… upper management at all.”

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