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Whistleblower in mortgage fraud lawsuit to receive $1.98M

The federal government has vast resources, but detecting fraud in programs and contracts is no easy task in the normal course of business. The False Claims Act (which was initially enacted during the President Lincoln years) allows private individuals to file a lawsuit on behalf of the government to expose fraud and recover unlawfully obtained taxpayer money. Whistleblowers receive a percentage of any verdict or settlement that arises from the lawsuit.

Businesses in a wide variety of industries engage in transactions that are tied to government contracts or government programs. The housing market is a vital part of the American dream. Most people in Wisconsin are aware of the meltdown in the housing market in 2008. The Federal Housing Administration backs many mortgage loans across the nation - that backing is funded through taxpayer dollars. Fraud in the mortgage industry harms homeowners and taxpayers alike.

The Department of Justice recently settled a whistleblower lawsuit with a direct endorsement lender (DEL) in the southern United States. Under FHA (and Housing and Urban Development, FHAs parent agency) programs, DELs have the ability to authorize mortgage loans for federally backed FHA insurance. DELs are supposed to follow government rules when originating, underwriting and endorsing mortgage loans for FHA insurance.

When a DEL approves a loan for FHA insurance, the federal agency does not reevaluate the underlying facts, but relies on the certification of compliance with the rules that the DEL supplies to the government. If a homeowner defaults on an FHA insured loan, HUD is responsible for handling the insurance claim.

The government says that the DEL, Universal American Mortgage Company LLC, approved FHA loans that the entity knew did not qualify. Federal officials also say that the lender gave underwriters incentives throughout the 6-year period involved in the federal inquiry that a recent False Claims Act settlement covers. The lender agreed to settle the lawsuit for $13.2 million. The court record shows that the lawsuit was originated by a woman who worked for an entity that was related to the mortgage lending company. The whistleblower will receive $1.98 million dollars for her participation in bringing forth evidence and initiating the lawsuit.

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