On January 25, 2018, a Florida-based homebuilder filed its Form 10-K annual report with the Securities and Exchange Commission (SEC), disclosing that its “mortgage subsidiary has been subpoenaed by the United States Department of Justice (DOJ) regarding the adequacy of certain underwriting and quality control processes related to Federal Housing Administration (FHA) loans originated and sold in prior years.” According to the report, the company has “provided information related to these loans and [its] processes to the DOJ,” but the DOJ has “not asserted any claim for damages or penalties.”
In recent years, the DOJ has brought claims against national mortgage lenders over alleged misconduct in connection with the lenders’ underwriting and endorsement of loans insured by the FHA. In those actions, the DOJ has sought recovery under various legal theories, including the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which permit treble and other special damages beyond actual losses. Other possible remedies from proceedings or a settlement may include restitution, fines, penalties, or alterations in the mortgage company’s lending practices. Enforcement Watch has covered similar allegations against other lenders, including those posted here, here, here, here, and here.
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