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Mortgage Company Resolves DOJ Allegations of False Claims Act Violations
On December 2, a Tennessee mortgage company agreed to pay the United States $70 million to resolve allegations that it violated the False Claims Act. According to the DOJ, the company, acting as a direct endorsement lender, knowingly originated and accepted FHA-insured mortgage loans that did not meet applicable HUD underwriting and quality control requirements. As part of the settlement agreement, the company admitted to engaging in the following conduct between January 1, 2006 and March 31, 2012: (i) employing unqualified junior underwriters to complete important underwriting tasks; (ii) setting high quotas for underwriters and disciplining them if the quotas were not met; and (iii) offering underwriters bonuses based in part on the number of loan files reviewed as incentive to increase loan production. Even though deficiencies in the loan underwriting process were identified in post-close audits, the company did not make any self-reports until 2009 and, even then, “[v]ery few of these self-reported loans were reported for containing serious underwriting deficiencies.” As a result of the company’s conduct, the FHA insured loans that were not eligible, purportedly suffering “substantial losses when it later paid insurance claims on those loans.”