DOJ and Mortgage Lender Settle FCA Allegations for $23.7 Million

The DOJ recently announced a $23.7 million settlement with a mortgage lender to resolve allegations that the lender had violated the False Claims Act (FCA) by failing to comply with material program requirements of HUD’s FHA and VA programs.

The DOJ’s investigation was triggered by a qui tam action brought by two former employees of the lender (the relators).  In the 2018 complaint that was recently unsealed, the relators alleged that the lender had used unqualified and inexperienced underwriters to underwrite FHA and VA loans, and that those underwriters miscalculated borrowers’ incomes, debts, and assets. The relators also alleged that the lender had failed to implement a proper quality control program.

The investigation had uncovered that the lender had failed to maintain quality control programs to prevent and correct underwriting deficiencies, self-report materially deficient loans, and ensure that the underwriting process had been free from conflicts of interest.  The lender admitted to certifying a material percentage of loans for FHA mortgage insurance and VA home loan guarantees that otherwise did not meet applicable requirements.  The lender also acknowledged that HUD and the VA would not have insured or guaranteed those loans, respectively, but for its false certifications.  The DOJ acknowledged that the lender had taken actions to stop the practices, both before and after the DOJ’s investigation, and gave the lender credit for doing so in connection with the settlement.

The matter is United States ex rel. McNeil v. Movement Mortgage, LLC, 1:18-cv-00848-LEK-DJS (N.D. N.Y. 2023).