In addition to health care fraud and government contracts fraud, the False Claims Act is also essential in the fight against mortgage fraud. While it is a phrase that few of us knew 15 years ago, mortgage fraud exploded in the first decade of the new millennium and it continues to be a major threat to our nation’s economy. Individual whistleblowers, people who see fraud and speak up, are the key to fighting back and our mortgage fraud lawyer is proud to partner with them in this important battle.
A Brief Overview of Mortgage Fraud
Before diving into a recent case, some readers may find a brief definition of mortgage fraud helpful. In its Mortgage Fraud Overview, the Federal Bureau of Investigations (“FBI”) explains: “Mortgage fraud is a crime characterized by some type of material misstatement, misrepresentation, or omission on a loan which is then relied upon by a lender.” The FBI goes on to note that there are two broad categories of mortgage fraud: 1) Fraud for housing which is typically perpetrated by a borrower looking to acquire property and 2) Fraud for profit which is typically perpetrated by financial institutions and industry leaders. Our focus in this post is on the latter, also the type of fraud blamed for the subprime mortgage crisis.
Lender Pays $133 Million to Settle Claims of Residential Mortgage Fraud
Sadly, mortgage fraud remains a real threat to our nation’s economic stability and the battle against mortgage fraud continues. On April 15, the Department of Justice (“DOJ”) announced that Freedom Mortgage Corporation (“FMC”) agreed to pay $133 million to settle allegations of mortgage fraud filed under the False Claims Act. As part of the settlement, FMC admitted to many of the allegations in the case which, in broad terms, alleged that FMC knowingly originated and underwrote home loans insured by the Federal Housing Administration (“FHA”) that did not meet program requirements.
According to the press release, FMC served as a direct endorsement lender (“DEL”) for the Department of Housing and Urban Development’s (“HUD”) FHA program. As a DEL, FMC had the power to originate, underwrite, and endorse FHA-insured mortgages. The FHA does not review such mortgages before insuring them and relies on DELs to follow program rules. FMC admitted that, from 2006 through 2011, it certified loans for FHA insurance that failed to meet program requirements and were not actually eligible for the FHA program. FMC also admitted that it did not perform required audits and other reviews in cases of early payment default (where the loan becomes more than 60 past due during the first six months the loan is in effect). The case further accused FMC of failing to report a single improperly originated loan despite a clear obligation to do so during the focal period and in 2012 reported only one such loan even though an internal review revealed hundreds of potentially improper FHA loans. According to the government, FMC’s actions meant HUD insured hundreds of ineligible loans that would not have been covered by the program if the rules had been followed. As a result, the government incurred substantial losses when it later had to pay out insurance claims on these ineligible, improperly-granted loans approved by FMC.
A False Claims Act Law Firm Partnering with Whistleblowers to Fight Mortgage Fraud
The FBI explains: “From foreclosure frauds to subprime shenanigans, mortgage fraud is a growing crime threat that is hurting homeowners, businesses, and the national economy.” The False Claims Act is key to fighting this threat. According to the DOJ, from January 2009 through the end of Fiscal Year 2015, False Claims Act claims led to the recovery of more than $5 billion in cases involving housing and mortgage fraud.
If you have witnessed mortgage fraud, you can be part of the fight against these crimes. Please call our government-backed mortgage loan fraud law firm to learn more. The law protects whistleblowers from retaliation and also provides substantial rewards to whistleblowers whose cases lead to a recovery of funds by the government.
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