National Bank Agrees to Pay $123.5 million As Part of a Settlement with the Justice Department Over Mortgage Lending Violations

DOJ  •  FCA/FIRREA  •  FHA

On February 25, 2015, the Department of Justice (“DOJ”) announced a settlement with a national bank over allegations that the bank originated and underwrote mortgage loans that did not meet applicable Department of Housing and Urban Development’s (“HUD”) requirements under the Federal Housing Administration (“FHA”) insurance program. The settlement covers the release of claims under the False Claims Act, the Financial Institutions Recovery, Reform, and Enforcement Act of 1989, the Program Fraud Civil Remedies Act, common law contractual and fraud remedies. The bank had purchased the mortgage division of another bank that had originated FHA loans. The DOJ alleged that as part of its own quality control findings, the bank was aware that a substantial percentage of these FHA loans were not eligible for FHA mortgage insurance. Specifically, the DOJ found that out of 1,097 loans with a “significant finding,” it only self-reported 321 violations. As part of the settlement, the bank admitted to certifying loans for FHA mortgage insurance that did not met HUD underwriting requirements for a 3 1/2 year period. The bank will pay the $123.5 million settlement amount to the United States Government.

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