Mortgage Fraud: The New FCA Arena
This week the United States Attorney’s Office for the Southern District of New York (Manhattan) announced that it had settled another major mortgage fraud case against a lending institution. Under the terms of the settlement agreement, Flagstar Bank FSB has agreed to pay $132.8 million in damages and penalties under the False Claims Act for improperly approving residential home mortgage loans for government insurance.
Manhattan U.S. Attorney Preet Bharara stated, “[This] is another stark example of how certain lenders put profit ahead of responsibility by recklessly churning out mortgage loans without regard to the risk that those loans would default or the significant consequences for the individual homeowners who would inevitably default on their loans, the housing market, and in the aggregate, our nation’s economy.”
On February 15, 2012, Bharra announced that Citicorp Inc.’s Citimortgage unit had agreed to pay $158.3 million to settle claims tied to mortgage fraud related to the federal home-loan insurance program. That false claims action filed by a whistleblower alleged more than six years of misconduct in connection with the Federal Housing Administration Direct Endorsement Program.
Both these cases come on the heels of a $1 billion settlement with the government announced by the Bank of America that relates at least in part to a False Claims Act case filed by a whistleblower alleging mortgage fraud. That case was unsealed last Friday in the Eastern District of New York (Brooklyn).
These cases are part of an overarching investigations by the United States Attorney’s Offices for the Southern (Manhattan) and Eastern (Brooklyn) Districts of New York into the fraudulent banking practices that occurred over the past decade.
Mortgage fraud will continue to be a focus of these investigations because of the billions of dollars in losses suffered by HUD, FHA, Fannie Mae and Freddie Mac as a result of the rampant mortgage fraud that was orchestrated by national banks during that time. This is a target rich environment for the government with many potential whistleblowers who will no doubt continue to come forward exposing the environment that led to these frauds over the last decade.
Tags: bank fraud, bank whistleblower, False Claims Act, FHA fraud, HUD fraud, mortgage fraud
This entry was posted on Friday, March 2nd, 2012 at 8:43 pm and is filed under Bank Fraud, bank whistleblower, False Claims Act, FHA fraud, government fraud, HUD fraud, mortgage fraud. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
