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Consumer Finance Insights
September 3, 2015

Reverse Mortgage Servicing Company Settles False Claims Act Allegations with HUD for $29.63 Million

On September 3, a reverse mortgage servicing company settled alleged violations of Federal Housing Administration (FHA) regulations with the U.S. Department of Housing and Urban Development (HUD).

In July 2013, an individual brought a qui tam action in the U.S. District Court for the Middle District of Florida pursuant to the False Claims Act.  The United States intervened in the action in March 2015, joining in the action as to allegations that the company engaged in a scheme to fraudulently obtain FHA insurance payments for debenture interest by failing to disclose in the insurance claims that it was not eligible for such interest payments because it had not complied with certain servicing deadlines required by regulation.  The United States also joined allegations regarding the company obtaining insurance payments for referral fees falsely represented as sales commissions.

As part of the settlement, the company’s parent company agreed to pay $29.63 million to resolve certain claims filed from August 2009 through March 2015.  The FHA insurance fund will receive $13.69 million of that sum, and the remaining funds will be remitted to the relator that brought the qui tam action and other federal entities.