Lending giant alleges a reverse mortgage servicer concealed a CFPB ban and a HUD settlement while dodging unpaid invoices
First American is seeking to freeze over $1.6 million in a reverse mortgage servicer's bank accounts, alleging fraud and concealed regulatory trouble.
In court papers filed on March 30, 2026, First American Title Insurance Company and First American Mortgage Solutions brought an action against Novad Management Consulting, a Maryland-based firm that held a federal contract with HUD to service home equity conversion mortgages — better known as reverse mortgages.
The dispute traces back to 2022, when Novad brought First American on board under a Master Services Agreement to handle lien release work tied to Novad's HUD contract. According to the filing, First American completed the work throughout 2022 and sent invoices, but Novad stopped paying after February 2023. The unpaid balance, as outlined in a September 2023 Notice of Default that Novad allegedly did not dispute, sits at $1,041,826.08. With interest running at one and one-half percent per month under the contract terms, the total now claimed comes to $1,628,573.38.
What allegedly happened next is where the case gets interesting for anyone in the mortgage servicing business.
When First American pressed for payment, Novad allegedly said it could not pay because of a contractual dispute with HUD — and promised to settle up once it recovered funds from litigation against the agency. First American says it relied on those assurances, held off on collection, and entered into a series of tolling agreements stretching into October 2025.
But the filing paints a very different picture behind the scenes. It alleges that in 2023, the Consumer Financial Protection Bureau investigated Novad for fraud in connection with its reverse mortgage servicing. By June 2024, Novad had reportedly entered into a consent decree with the CFPB, admitting to deceptive practices in violation of the Consumer Financial Protection Act and accepting a permanent ban from the reverse mortgage business entirely. According to the court papers, none of this was ever shared with First American.
The alleged concealment did not stop there. The filing states that Novad reached a settlement with HUD in September 2025 and received full payment — yet on December 9, 2025, told First American that the Department of Justice had not yet signed off on the deal. After that exchange, Novad allegedly went dark and stopped responding to any inquiries.
First American has since filed a demand for arbitration and is now asking the court for an emergency order to freeze Novad's accounts at Truist Bank before the funds can be moved. No final determination has been made in the case, and Novad has not yet responded to the allegations.
For mortgage professionals, this case is a pointed reminder of what can go wrong in the vendor chain. A servicing partner's undisclosed regulatory problems — and the alleged concealment of a federal enforcement action — may have left a major industry player chasing payment with little warning. It raises uncomfortable but necessary questions about counterparty due diligence and what happens when the company you are relying on has already been barred from the very business you hired them to support.
The case is still in its earliest stages.
