December 15, 2022. The United States Department of Justice settled a case against mortgage company Academy Mortgage Corporation for alleged violations of the False Claims Act. Under the terms of the settlement, Academy paid $38.5 million for allegedly falsely certifying compliance with Federal Housing Administration (FHA) rules on mortgages. The whistleblower was a former underwriter for the mortgage company. For reporting the company’s alleged misconduct and filing a successful qui tam lawsuit, the whistleblower will receive a reward of $11,511,500 or approximately 29% of the settlement.
During the mortgage origination and underwriting process, a prospective borrower works with a lender to get a loan to purchase a home. For mortgages which are insured by the FHA, underwriters must certify that they have followed the guidelines set forth by the FHA, which define what documents the underwriter needs to collect from the prospective lender, notices to provide, and other key facets of the underwriting process, in order to originate a compliant mortgage loan. The FHA insures mortgages on a variety of residential properties in the U.S., and if a lender defaults or stops paying their mortgage, a lender can make a claim to the FHA for the unpaid loan balance. The whistleblower alleged that Academy made mortgage loans that were not in compliance with FHA rules, and so any of Academy’s claims to the FHA for unpaid mortgages constituted false claims, violating the False Claims Act. When a company submits a claim to the government for payment, and the good or service for which they are making the claim is tainted by fraudulent activity, then the company has made a false claim. Making false claims against a federally funded insurance program abuses taxpayer dollars, threatens the solvency of the insurer, and puts future homeownership further out of reach, as insurers must increase premiums to account for fraud, waste, and abuse.
The Principal Deputy Assistant Attorney General for the Justice Department commented about this case, “Lenders that knowingly cause the government to guarantee loans that are materially deficient put both homeowners and the public fisc at risk.” The False Claims Act is the government’s tool to help ordinary citizens with specialized knowledge, such as the underwriter whistleblower in this case, report fraud in their workplace and industry and be rewarded for doing so.
If you would like to report mortgage fraud, you can contact attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva was the Senior Counsel for Health Care Fraud. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Renée at [email protected] (tel.: 202-417-3664) or contact Eva Gunasekera at [email protected]. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at https://www.fraudfighters.net/.