Archive

February 12, 2018

The SEC announced an enforcement action against Deutsche Bank Securities, Inc. that resulted in a repayment of more than $3.7 million to consumers, including $1.48 million in disgorgement payments. The enforcement action was based on an SEC investigation that found traders and salespeople making false and misleading statements when negotiating sales of commercial mortgage-backed securities. The false and misleading statements led customers to overpay  for the securities and Deutsche Bank failed to have an adequate compliance program to prevent and detect the misconduct by its employees. SEC

March 29, 2018

Barclays Capital, Inc. and several of its affiliates agreed to pay $2 billion to settle claims of violating  (together, Barclays) to settle claims of violating the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) relating to Barclays’ underwriting and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.  Specifically, the government alleged that Barclays caused billions of dollars in losses to investors by engaging in a fraudulent scheme to sell 36 RMBS deals, and that it misled investors about the quality of the mortgage loans backing those deals. DOJ

February 28, 2018

Deloitte & Touche agreed to pay $149.5 million to resolve allegations of violating the False Claims Act arising from Deloitte’s role as the independent outside auditor of Taylor, Bean & Whitaker Mortgage Corp. (TBW), a failed originator of mortgage loans insured by the Federal Housing Administration (FHA) in the Department of Housing and Urban Development (HUD). According to the government, TBW engaged in a long-running fraudulent scheme involving the sale of fictitious or double-pledged mortgage loans, and as a result, TBW’s financial statements failed to reflect its severe financial distress. The government alleged Deloitte, as TBW’s independent outside auditor, knowingly deviated from applicable auditing standards and therefore failed to detect TBW’s fraudulent conduct enabling TBW to continue originating FHA-insured mortgage loans until TBW collapsed and declared bankruptcy in 2009. DOJ

February 13, 2018

California announced the indictment of four individuals on 194 criminal felony counts for allegedly operating a mortgage fraud scheme throughout Southern California. The scheme resulted in a loss of approximately $2 million for 40 victims who were seeking loans to help pay off their mortgages. Many of the victims lost their homes and life savings. Andrew Valles, Jemal Lilly, Mark Bellinger and Arnold Millman were indicted by a grand jury in the San Diego Superior Court for grand theft, filing false or forged documents in a public office, conspiracy to commit those offenses, and identity theft, as well as special allegations for aggravated white collar crime. Two of defendants, Jemal Lilly and Mark Bellinger were arrested on January 30, 2018; they pled not guilty at their arraignments on February 2 and February 13, 2018. Defendants Andrew Valles and Arnold Millman have not been arrested and are currently at large and out of custody. CA

January 3rd, 2018

New York announced that 49 states, the District of Columbia and 45 state mortgage regulators reached a $45 million settlement with New Jersey-based mortgage lender and servicer PHH Mortgage Corporation. The settlement resolves allegations that PHH, the nation’s ninth largest non-bank residential mortgage servicer, improperly serviced mortgage loans from January 1, 2009 through December 31, 2012. The agreement requires PHH to adhere to comprehensive mortgage servicing standards, conduct audits, and provide audit results to a committee of states. The settlement does not release PHH from liability for conduct that occurred beginning in 2013. NY, FL For an earlier federal settlement, see here.

December 22nd, 2017

California announced a $125 million settlement with the Royal Bank of Scotland (RBS), an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to California’s public employee and teacher pension funds, CalPERS and CalSTRS, respectively. Mortgage-backed securities are complex investments which include thousands of mortgage loans of potentially varying quality, where the buyer typically relies on assurances that the loans have been carefully screened and are not too risky. An investigation conducted by the Attorney General’s Office found that the descriptions of these mortgage-backed securities to investors failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to remove poor quality loans from the investments was not adequately performed. RBS was aware of the misrepresentations but failed to correct them. This resulted in millions in losses to CalPERS and CalSTRS. CA

December 8, 2017

Louisiana-based Iberiabank Corporation, Iberiabank and Iberiabank Mortgage Company agreed to pay roughly $11.7 million to resolve allegations they violated the False Claims Act by falsely certifying they were complying with Federal requirements in order to obtain insurance on mortgage loans from the Federal Housing Administration.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former Iberiabank employees Kelley R. Shackleford and Karen Mills.  They will receive a whistleblower award of roughly $2.2 million from the proceeds of the government's recovery.  DOJ

September 19, 2017

A judgment of roughly $296 million was awarded against the entities formerly known as Allied Home Mortgage Capital Corporation and Allied Home Mortgage Corporation and a judgment of roughly $25 million was awarded against Allied's president and CEO Jim Hodge, following a jury verdict that Allied and Hodge violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for over a decade of fraudulent misconduct while participating in the Federal Housing Administration (“FHA”) mortgage insurance program.  According to the evidence presented at trial, Allied and Hodge abused the FHA mortgage insurance program by falsely certifying that thousands of high risk, low quality loans were eligible for FHA insurance and then submitting insurance claims to FHA when any of those loans defaulted.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act.  The whistleblower will receive an award from the proceeds of the government's recovery. DOJ (SDNY)

August 8, 2017

PHH Corp., PHH Mortgage Corp. and PHH Home Loans agreed to pay roughly $75 million to resolve charges they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) that did not meet applicable requirements.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by former PHH employee Mary Bozzelli.  She will receive a whistleblower award of roughly $9 million from the proceeds of the government's recovery.  DOJ

August 16, 2017

New York announced a $6.5 million settlement with the owners and operators of the Manhattan Club, a timeshare building in Midtown Manhattan, over the sponsor’s repeated false promises to potential and current share owners. The settlement is the largest in recent history for the Attorney General's Real Estate Finance Bureau. Under the terms of the settlement, the operators of the Manhattan Club, at 200 West 56th Street, acknowledge that they repeatedly misled shareowners about the club’s reservation process, their ability to sell back their shares, and the details of the club’s state-approved offering plan. NY