Archive

February 5, 2016

The Department of Justice, the Department of Housing and Urban Development, the Consumer Financial Protection Bureau, along with 49 states, and the District of Columbia announced that HSBC will pay $470 million to address mortgage origination, servicing, and foreclosure abuses. The settlement also requires HSBC to substantially change how it services mortgage loans, handles foreclosures and ensures the accuracy of information provided in bankruptcy court. These terms are meant to prevent abuses such as robo-signing, improper documentation and the loss of paperwork. NY, CA, PA, TX, IL, MA

August 21, 2014

Bank of America agreed as part of its record-breaking $16.65 billion mortgage fraud settlement to pay $245 million for failing to inform investors during the financial crisis about known uncertainties to future income from its exposure to repurchase claims on mortgage loans.  SEC

July 24, 2014

Morgan Stanley agreed to pay $275M to settle charges of misleading investors in a pair of residential mortgage-backed securities (RMBS) securitizations it underwrote, sponsored, and issued.  In an asset-backed securities offering, federal regulations under the securities laws require the disclosure of delinquency information for the mortgage loans serving as collateral.  Morgan Stanley allegedly misrepresented the current or historical delinquency status of mortgage loans underlying two subprime RMBS securitizations that came against a backdrop of rising borrower delinquencies and unprecedented distress in the subprime market.  SEC

December 2, 2015

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.  DOJ

November 5, 2015

The Department of Justice’s US Trustee Program entered into a national settlement with Wells Fargo Bank requiring the bank 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.  DOJ

October 6, 2015

Fifth Third Bank agreed to pay $85 million to resolve civil fraud claims arising from the bank’s origination of residential mortgage loans insured by the Federal Housing Administration.  FTB made a voluntary disclosure of approximately 1,400 mortgage loans it had certified as eligible for FHA insurance, later determined were materially defective and thus ineligible for FHA insurance, but never self-reported to HUD, resulting in millions of dollars in HUD losses.  This matter arose, in part, from the filing of a whistleblower complaint under the qui tam provisions of the False Claims Act.  DOJ (NY)

September 24, 2015

Hector Hernandez, owner and operator of Miami mortgage lender Great Country Mortgage Bankers was sentenced today to serve 135 months in prison and pay $64,508,141 in restitution and forfeit $8,000,000 in illicit profits for his role in orchestrating a $64 million mortgage fraud scheme.  Also sentenced was real estate developer Aleida Fontao (41 months in prison, $7,131,952 in restitution and $400,000 in forfeiture); and underwriter Olga Hernandez (51 months in prison and $24,512,755 in restitution).  Hector Hernandez admitted that his company employed loan officers, loan processors and underwriters, including Olga Hernandez and Fontao, whom he knew approved and submitted false and fraudulent Federal Housing Administration mortgage loan applications and accompanying documents to HUD on behalf of unqualified borrowers.  These documents included false pay stubs, false verification of employment forms, and fictitious letters from the borrowers.  DOJ

September 4, 2015

Walter Investment Management Corp. agreed to pay $29.63 million to resolve allegations that, through its subsidiaries, Reverse Mortgage Solution Inc., REO Management Solutions LLC and RMS Asset Management Solutions LLC, 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.  The allegations originated in a whistleblower lawsuit filed former RMS executive Matthew McDonald under the qui tam provisions of the False Claims Act.  McDonald will receive a whistleblower award of $5.15 million.  DOJ

August 24, 2015

Ayman Shahid, former president of Discovery Sales Inc., pleaded guilty to conspiracy to commit bank fraud.  DSI was the sales arm of affiliated residential construction companies, including Discovery Home Builders and Albert D. Seeno Construction Co.  Shahid admitted he conspired with others to fraudulently cause bank underwriters to approve mortgage loans for unqualified buyers during the height of the financial crisis.  DOJ

July 14, 2015

Hector Hernandez, a Miami-area real estate developer and owner of the mortgage company Great Country Mortgage Bankers, pleaded guilty to a mortgage fraud scheme involving federally insured mortgages that caused losses of $64 million to the Federal Housing Administration (FHA).  Specifically, while most of Great Country’s potential borrowers did not qualify for the FHA-insured loans, Hector Hernandez and his business partner, Aleida Fontao, directed Great Country employees to falsify important documents in the potential borrowers’ loan applications to make them appear qualified.  DOJ