On December 8, the U.S. Department of Justice (DOJ) announced that it had settled allegations that a Louisiana-based mortgage lender violated the False Claims Act (FCA) through its underwriting of Federal Housing Administration (FHA)-insured mortgage loans. In the lawsuit, which is pending in the U.S. District Court for the Eastern District of Arkansas, the DOJ alleged that the lender falsely certified compliance with underwriting requirements for loans underwritten and endorsed for FHA insurance through HUD’s direct endorsement lender program. The lender agreed to pay nearly $11.7 million to resolve the allegations.
As part of the settlement agreement, the lender admitted that between January 1, 2005, and December 31, 2014, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and were, therefore, ineligible for FHA mortgage insurance. The lender also admitted that it did not timely self-report material violations of HUD requirements. Further, the lender admitted that, despite assuring HUD that it was not paying improper incentives to underwriters, it continued to pay underwriters commissions through calendar year 2014, in violation of HUD requirements.
The settlement was the result of both a whistleblower lawsuit brought several years by former employees of the mortgage company, and a joint investigation conducted by HUD, HUD’s Office of Inspector General, and the U.S. Attorney’s Office for the Eastern District of Arkansas. The whistleblowers will receive a 20 percent share in the settlement recovery.