On July 20, 2017, acting United States Attorney Stephen Muldrow announced a civil settlement with the owner of a Florida condominium complex over fraudulent reverse mortgage transactions. Defendant had been accused of violating the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”).
The Federal Housing Administration (“FHA”) insures reverse mortgages, called home equity conversion mortgages, issued by approved lenders. According to the U.S. Attorney, the defendant artificially inflated appraisal values of the condos on his property, targeted elderly buyers to purchase condos at inflated prices, and, as part of those purchases, required the buyers to immediately apply for reserve mortgages. The U.S. Attorney further asserted that defendant would then assist the buyers in completing the paperwork for reserve mortgage applications. Those applications allegedly omitted material disclosures related to the banks’ decisions to underwrite the reverse mortgages. Defendant then allegedly had the loan funds wired to his own account at closing.
Defendant agreed to pay $475,000 to the Department of Housing and Urban Development (“HUD”) for damages allegedly caused to the FHA lending program. The settlement resolved all claims, while not making any determinations as to liability. This settlement concludes an investigation that began in 2008 by the U.S. Attorney’s Office and HUD’s Office of Inspector General (“HUD-OIG”) into the defendant’s practices related to improperly obtained proceeds of federally insured reverse mortgages.