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Financial Services Law Insights and Observations

DOJ reaches $25 million settlement with mortgage lender to resolve false claims allegations

Federal Issues False Claims Act / FIRREA DOJ FHA Mortgages

Federal Issues

On October 20, the DOJ announced a nearly $25 million settlement with a California-based mortgage lender in connection with alleged violations of the False Claims Act (FCA) related to originating and underwriting mortgages insured by the Federal Housing Administration (FHA). According to the DOJ, the lender “knowingly approved ineligible loans that later defaulted and resulted in claims to FHA for mortgage insurance,” failed to comply with material program rules requiring lenders to maintain quality control programs to prevent underwriting deficiencies, and failed to self-report identified materially deficient loans. The mortgage lender agreed to pay the DOJ $24.9 million to resolve the FCA claims. In addition, a whistleblower will receive nearly $5 million under the settlement. The DOJ’s press release noted that the claims “are allegations only, and [that] there has been no determination of liability.”

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