August 9, 2017

Mortgage Fraud Whistleblower Gets Over $9 Million

By the C|C Whistleblower Lawyer Team

Yesterday, the U.S. Department of Justice (DOJ) announced a nearly $75 million settlement with PHH Mortgage Corporation regarding the company’s failure to meet origination, underwriting, and quality-control regulations promulgated by Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Former PHH employee Mary Bozzelli alerted the government to aspects of the fraud in 2013.  As a result of the settlement, Ms. Bozzelli will receive over $9 million.  Ms. Bozzelli worked as an underwriter and supervisor for PHH for nearly three decades.  Two years after she left PHH, Ms. Bozzelli filed a whistleblower lawsuit under the False Claims Act regarding misconduct she had observed during her tenure.

The FHA relies on Direct Endorsement Lenders, like PHH, to verify that FHA-insured loans comply with the agency’s credit and eligibility standards.  As part of the settlement, PHH admitted that for five years it failed adhere to HUD’s underwriting standards by, among other things, failing to document the creditworthiness of borrowers and certifying loans when the borrower did not meet the minimum statutory investment for the loan.  In addition, PHH failed to comply with the FHA’s mandatory self-reporting requirements until the United States launched its investigation in 2013.

“By failing to comply with FHA regulations, PHH put taxpayers and borrowers at risk of sustaining significant financial losses,” stated Acting U.S. Attorney Benjamin G. Greenberg in a press release issued by DOJ. “This case and the resulting $75 million dollar settlement demonstrate that U.S. Attorney’s Offices and our investigative partners across the country are committed to holding lenders accountable who knowingly submit unqualified loans and compromise needed governmental programs.”

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