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Financial Services Law Insights and Observations

Foreclosure firm and affiliates agree to DOJ settlement resolving FCA allegations

Federal Issues DOJ Fannie Mae Department of Veterans Affairs Foreclosure Mortgages FHFA False Claims Act / FIRREA Whistleblower

Federal Issues

On December 4, the U.S. Attorney for the Southern District of New York announced that a New York foreclosure law firm and its wholly-owned affiliates—a process server and a title search company (defendants)—have agreed to pay $4.6 million to resolve False Claims Act allegations claiming that between 2009 and 2018 the defendants systematically generated false and inflated bills for foreclosure-related and eviction-related expenses and caused those expenses to be paid by Fannie Mae. The settlement also resolves claims arising from the same misconduct pertaining to eviction-related expenses that were submitted to and ultimately paid by the Department of Veterans Affairs (VA). The DOJ alleges that the process server and title search company both added “additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses,” which were then submitted by the law firm for reimbursement. According to the DOJ, “[l]awyers are not above the law. For years, the [law firm] submitted bills to Fannie Mae and the VA that contained inflated and unnecessary charges. This Office will continue to hold accountable those who seek to achieve profits by fraudulent conduct.” The DOJ states that Fannie Mae’s Servicing Guide requires “all foreclosure costs and expenses be ‘actual, reasonable, and necessary,’ and that foreclosure law firms ‘must make every effort to reduce foreclosure-related costs and expenses in a manner that is consistent with all applicable laws.’”

The DOJ further notes that the defendants agreed to pay an additional $1,518,000 to resolve separate False Claims Act claims pursued by the whistleblower.

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