September 16, 2016

DOJ Catch Of The Week — Regions Bank

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “Catch of the Week” goes to Regions Bank.  On Tuesday, the Birmingham-based bank agreed to pay $52.4 million settle charges that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.  See DOJ Press Release.

Specifically, Regions admitted it certified for FHA insurance mortgage loans that did not meet certain HUD underwriting requirements regarding borrower creditworthiness.  Regions further admitted it did not maintain a quality control program that complied with HUD requirements.  Regions also failed to follow HUD’s self-reporting requirements, failing to disclose to HUD materially deficient loans of which it was aware.  As a result of Regions’ misconduct, HUD insured hundreds of loans approved by Regions that were not eligible for FHA mortgage insurance and that HUD would not otherwise have insured.  HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

In announcing the settlement, the government stressed the importance of FHA-backed mortgage lenders following the rules.  DOJ Civil Chief Benjamin Mizer stated: “Mortgage lenders that participate in the FHA insurance program must follow the requirements intended to safeguard its integrity and to protect homeowners,” and that the government “will continue to hold responsible lenders that knowingly violate these important requirements.”  U.S. Attorney for the Middle District of Florida A. Lee Bentley III echoed this strong sentiment, noting that “the FHA insurance program plays a critical role in the stability of the housing market,” and that “lender misconduct that puts this program at risk will not be tolerated.”

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