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October 19, 2018

Settling a case brought by a whistleblower, mortgage lender Universal American Mortgage Company will pay $13.2 million to the United States.  UAMC acted as a direct endorsement lender in the Federal Housing Administration insurance program, originating and underwriting mortgages with FHA insurance.  Because the federal government is liable for FHA loans that default, DELs such as UAMC are required to follow underwriting and quality control rules in issuing mortgages; UAMC allegedly did not follow those rules and knowingly submitted loans for FHA insurance that did not qualify.  The whistleblower, Kat Nguyen-Seligman, a former employee of a UAMC related entity, will receive $1,980,000 from the settlement.  DOJ; USAO W.D.Wa.

October 16, 2018

Nomura Holding America Inc. and its affiliates have agreed to pay a civil penalty of $480 million to settle claims that it knowingly misled investors of its residential mortgage-backed securities (RMBS) in the years leading up to the financial crisis of 2008. From 2006 to 2007, Nomura allegedly marketed falsely to investors that its due diligence process was "industry leading," despite knowing that many of the loans it sold did not comply with regulations, or had not even gone through their due diligence process. Among the investors defrauded were Fannie Mae, Freddie Mac, retirement funds, and university endowments. USAO EDNY

October 9, 2018

HSBC will pay a $765 million civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) to settle claims that it misrepresented the quality of assets in residential mortgage-backed securities (RMBS) that HSBC packaged and sold to investors between 2005 and 2007.  HSBC was also alleged to have misrepresented the due diligence procedures it followed in reviewing loans for securitization, claiming to follow more stringent procedures than it actually did follow.  USAO Colorado.

August 14, 2018

In the largest civil penalty imposed by the Justice Department for FIRREA violations leading up to the 2008 financial crisis, the Royal Bank of Scotland Group plc (RBS) will pay $4.9 billion to resolve claims that it knowingly misled investors of its residential mortgage-backed securities (RMBS), including Fannie Mae and Freddie Mac. According to a statement of facts included with settlement details, RBS knew from its own reviews that its loans carried a high risk of default but failed to disclose that to investors. Furthermore, it allowed its due diligence process to become a total sham by not requiring that loan originators correct errors, instructing due diligence vendors to waive defects, and self-imposing caps on the number of faulty loans it removed from a RMBS. DOJ; USAO MA

August 2, 2018

Aurora Loan Services, LLC, a subsidiary of Lehman Brothers Holdings, Inc., has agreed to pay a civil penalty of $41 million to settle allegations of FIRREA violations in the loans it sold between 2004 and 2008. The mortgage originator gave preferential treatment to five "Platinum" lenders by allowing them to underwrite their own loans and freeing them from quality control standards that were imposed on other lenders. The resulting decline in loan quality was linked to a higher rate of default, hurting investors who bought residential-based mortgage securities from Lehman Brothers. USAO CO

July 26, 2018

George Barnard was sentenced to five years in federal prison and ordered to pay restitution of $12,774,941.89 and forfeit $4,262,279.38 for defrauding lenders of almost $13 million. Barnard, who owned several title companies and was partial owners of a mortgage corporation, used money intended to fund mortgage loans and pay off the borrowers’ existing mortgages for his personal benefit. USAO EDPA

July 3, 2018

Illinois announced a $20 million settlement with Royal Bank of Scotland as a result of the bank’s misconduct in its marketing and sale of risky residential mortgage-backed securities (RMBS) leading up to the 2008 economic collapse. The settlement with Royal Bank of Scotland resolves an investigation by Madigan’s office over the bank’s failure to disclose the true risk of RMBS investments. IL

June 21, 2018

Jasmin Polanco, a Boston-based real estate lawyer, was sentenced to 15 months in prison and ordered to pay $1.2M in restitution for her role in a large mortgage fraud conspiracy. According to prosecutors, Polanco and other defendants engaged in a scheme to defraud banks via fake short sales of homes, artificially decreasing their value, before another member of the conspiracy purchased the home at the artificially low value. USAO Massachusetts

June 12, 2018

Merrill Lynch, Pierce, Fenner & Smith Inc. has agreed to pay over $15 million to resolve allegations that its traders and salespersons overcharged Merrill Lynch customers for Residential Mortgage Backed Securities, pocketing the mark-ups as undisclosed commissions. According to the Commission, the bank failed to reasonably supervise its employees and to implement measures to prevent and detect the fraud. SEC

June 6, 2018

California-based fraudsters Maher Obagi and Mohamed Salah each received prison sentences and orders to pay millions in restitution for perpetrating a mortgage fraud scheme during the 2008 financial crisis. Obagi and Salah propped up struggling condo developments by buying multiple units at a discount, then concealed these kickbacks from lenders, who funded loans in excess of actual purchase prices; many of the loans went into default, costing mortgage lenders, including Fannie Mae and Freddie Mac, more than $10 million. USAO CDCA
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