Whistleblower Claim Leads to a $23.75m Settlement
A nationwide lender based in South Carolina agreed to pay $23.75m to settle allegations that it failed to comply with FHA underwriting requirements, according to an announcement by the Justice Department on June 29, 2023.
Like many such False Claims Act cases, this one was brought to the attention of authorities by two whistleblower former employees. The employees will share $4m of that settlement, and the remainder will cover damages from the defaulted loans.
Under FHA regulations, lenders that participate in the FHA mortgage insurance program must ensure that loans meet certain credit and underwriting criteria.
As part of the settlement, the mortgage company admitted that it certified for FHA mortgage insurance, as well as for VA home loan guarantees, certain loans that did not meet applicable requirements and, therefore, were not eligible under those programs.
The mortgage company told a local newspaper that the US Attorney noted we ‘took significant measures to stop the practices, both before and after being notified of the United States’ investigation.’” The whistleblowers’ lawyer agreed, telling the newspaper that the company “was more cooperative and transparent than a lot of other lenders were with the government.”
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