Housing and Mortgage Fraud

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

July 3, 2017

Prospect Mortgage Company agreed to pay roughly $4 million to settle charges of violating the False Claims Act stemming from Prospect’s participation in the Direct Endorsement Lender Program administered by the Federal Housing Administration and Department of Housing and Urban Development.  The government alleged Prospect falsely certified compliance with critical underwriting and quality control requirements when originating loans insured by the FHA and HUD resulting in substantial losses to the government when the loans defaulted and ripened into claims by Prospect for insurance payments from the government.  DOJ (NDGA)

June 7, 2017

The CFPB took action against mortgage servicer Fay Servicing for failing to provide mortgage borrowers with legally required protections against foreclosure. Fay violated the CFPB’s servicing rules by keeping borrowers in the dark about critical information about the process of applying for foreclosure relief. The CFPB also found instances where the servicer illegally launched or moved forward with the foreclosure process while borrowers were actively seeking help to save their homes. Fay Servicing will pay up to $1.15 million to harmed borrowers and must stop its illegal practices. CFPB

May 16, 2017

Austin-based Financial Freedom agreed to pay more than $89 million to resolve charges it violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) in connection with its participation in a federally insured Home Equity Conversion Mortgages or "reverse mortgage" program.  According to the government, Financial Freedom sought to obtain insurance payments for interest from the Federal Housing Administration despite failing to properly disclose the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings.  The allegations originated in a whistleblower declaration filed pursuant to FIRREA by Sandra Jolley, a consultant for the estates of borrowers who took out HECM loans.  She will receive a whistleblower award of $1.6 million from the proceeds of the government's recovery. DOJ