January 8, 2016

Top-10 DOJ Mortgage Fraud Settlements For 2015

By the C|C Whistleblower Lawyer Team

Here is our look-back at the top-10 Department of Justice mortgage fraud settlements in 2015.  Click here for a full chronological listing of all the DOJ False Claims Act and other fraud recoveries for 2015.

     10.  WALTER INVESTMENT — Walter Investment Management Corp. agreed to pay $29.6 million to resolve allegations that, through its subsidiaries, Reverse Mortgage Solution, REO Management Solutions and RMS Asset Management Solutions, it violated the False Claims Act in connection with the subsidiaries’ participation in the Department of Housing and Urban Development’s Home Equity Conversion Mortgages program, which insures “reverse” mortgage loans. Click here for more.

     9.  JPMORGAN CHASE — The bank agreed to pay more than $50 million (including cash payments, mortgage loan credits and loan forgiveness) to over 25,000 homeowners who are or were in bankruptcy. Chase acknowledged it filed in bankruptcy courts around the country more than 50,000 payment change notices that were improperly signed by persons who had not reviewed the accuracy of the notices.  Click here for more.

     8.  FRANKLIN AMERICAN — Franklin American Mortgage Company agreed to pay $70 million to resolve allegations 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. Specifically, First American audits identified substantial percentages of seriously deficient loans but the company reported very few deficiencies to HUD, causing the FHA to insure hundreds of loans that were not eligible and, as a result, the FHA suffered substantial losses when it later paid insurance claims on those loans.  Click here for more.

     7.  GREAT COUNTRY MORTGAGE — Hector Hernandez, owner and operator of Miami mortgage lender Great Country Mortgage Bankers was sentenced to pay $72.5 million (and 11 years in prison) for his role in orchestrating a $64 million mortgage fraud scheme under which his company employed loan officers, loan processors and underwriters who approved and submitted false and fraudulent Federal Housing Administration mortgage loan applications and accompanying documents to HUD on behalf of unqualified borrowers. Click here for more.

     6.  WELLS FARGO — The bank agreed to pay $81.6 million for failing to provide homeowners with legally required notices and thus the opportunity to challenge the accuracy of mortgage payment increases. Wells Fargo acknowledged failing to timely file more than 100,000 payment change notices and perform more than 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy between 2011 and 2015.  Click here for more.

     5.  FIFTH THIRD BANK — The bank agreed to pay $85 million to resolve charges of originating residential mortgage loans insured by the Federal Housing Administration which it had certified as eligible for FHA insurance but were actually materially defective and thus not so eligible, resulting in millions of dollars in HUD losses. Click here for more.

     4.  MORTGAGE SERVICERS — Five of the nation’s largest mortgage servicers — including JPMorgan Chase, Wells Fargo; Citi, Ally Financial and BAC Home Loans (formerly known as Countrywide) — entered into a settlement under which close to one-thousand military service members will be eligible to receive over $123 million for mortgage foreclosures that violated the Servicemembers Civil Relief Act. The statute generally prohibits non-judicial foreclosures against service members who are in military service or within the applicable post-service period.  Click here for more.

     3.  METLIFE HOME LOANS — The Texas-based mortgage finance company agreed to pay $123.5 million to resolve allegations it originated and underwrote (through MetLife Bank) mortgage loans insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable FHA requirements. Click here for more.

     2.  FIRST TENNESSEE BANK — The Memphis-based financial institution agreed to pay $212.5 million to resolve allegations it originated and underwrote (through First Horizon Home Loans) mortgage loans insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements. Click here for more.

     1.  STANDARD & POOR’S — The ratings agency giant, along with its parent corporation McGraw Hill Financial Inc., agreed to pay $1.375 billion to settle charges it schemed to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs). According to the government, S&P falsely represented that its ratings of RMBS and CDOs were objective, independent and uninfluenced by S&P’s business relationships with the investment banks that issued them.  Instead, S&P allegedly issued inflated ratings that misrepresented the securities’ true credit risks causing RMBS and CDO investors to incur substantial losses.  Click here for more.

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