Consumer Finance Insights
May 13, 2016

National Bank Settles False Claims Act Allegations for $64 Million

On May 13, the Department of Justice (DOJ) announced that it has reached a $64 million settlement agreement with a national bank relating to the bank’s participation in the Direct Endorsement Lender Program of the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA). The agreement resolves claims that were originally brought by a qui tam plaintiff in the United States District Court for the Western District of New York.

The settlement relates to the bank’s certification of loans for FHA insurance between January 1, 2006 and December 31, 2011, in alleged violation of the False Claims Act.  According to DOJ, the bank certified loans that were not eligible for FHA insurance.  DOJ also alleges that the bank failed to maintain a quality control program that complied with HUD requirements and that the bank failed to self-report certain loans as required by HUD’s self-reporting guidelines.  As a result of this conduct, DOJ claims that HUD incurred losses on hundreds of loans that were wrongfully approved for FHA insurance and on which HUD later paid insurance claims.  The settlement agreement and statement of facts do not contain any admission of liability on the bank’s part.

As reported by Consumer Finance Enforcement Watch, this settlement is the third large FHA-related settlement announced by DOJ in the past five weeks.

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