Blog Enforcement Watch October 23, 2020

U.S. Department of Justice Announces $24.9 Million Settlement With National Mortgage Company Resolving False Claims Act Allegations

On October 22, 2020, the Department of Justice (DOJ) announced that it had reached a settlement with a San Diego-based national mortgage lender, resolving allegations that the company had originated and underwrote mortgages insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) without following program requirements, allegedly in violation of the False Claims Act and common law.

Under FHA regulations, lenders that participate in the FHA mortgage insurance program must ensure that loans meet certain credit and underwriting criteria. Here, the lender allegedly knowingly approved ineligible loans that later defaulted and resulted in claims to FHA for mortgage insurance, failed to self-report deficient loans, and failed to prevent and correct underwriting deficiencies. This suit originated when a whistleblower at the company filed a qui tam lawsuit against the company in the United States District Court for the Southern District of California and the United States then intervened. The settlement was the result of a coordinated effort by the DOJ’s Commercial Litigation Branch, HUD’s Office of Inspector General, and the United States Attorney’s Offices for the Southern District of California and the District of Columbia.

The lender agreed to pay $24.9 million to the United States in connection with the settlement.