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Jury Finds Mortgage Company and CEO Liable for Fraud; Awards $92 Million in Damages
A federal jury has ordered two Texas-based home mortgage entities and their chief executive to pay nearly $93 million for defrauding the U.S. government into insuring thousands of risky loans, the Department of Justice announced on November 30.
The mortgage companies and their former CEO were found liable for violating the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by, among other things, failing to maintain an adequate quality control program; and submitting false annual certifications regarding quality control requirements. Specifically, the government contended that defendants operated over 100 “shadow” branch offices that originated FHA-insured mortgage loans without obtaining the necessary HUD approval, and which were therefore not subject to HUD oversight.
Ultimately, the jury awarded $92,982,775 in total damages, including $7,370,132 against the CEO specifically—a sum that is subject to mandatory tripling. Further penalties relating to the FIRREA violations are expected, which U.S. District Judge George Hanks will set at a later date.