FHA Mortgage Insurance Abuses

Keller Rohrback L.L.P. is currently investigating JPMorgan Chase Bank, Washington Mutual, Bear Stearns Residential Mortgage, Bank of America, Countrywide, Citigroup, and HSBC, among others, for alleged mortgage originator abuse of the Federal Housing Administration (“FHA”) mortgage insurance offered through the Direct Endorsement Lender program, in conjunction with the origination of purchase loans, home-improvement loans, and mortgage refinancing loans. In particular, the investigation focuses on lax lender mortgage selection practices, deficient appraisal practices, and inappropriate evaluation of borrower income by lenders to make mortgages qualify for the government’s FHA guarantee. Additionally, lender eligibility to maintain status as a Direct Endorsement Lender was compromised by the practices of lenders who allegedly failed to audit early-payment defaults, were lacking in knowledge of HUD-compliant underwriting and quality control practices, and allegedly made false statements to obtain FHA insurance resulting in wrongful endorsement of mortgages to be insured. These abusive practices allowed lenders to obtain FHA guarantees, thereby making the mortgages marketable in the secondary mortgage market. When these borrowers defaulted, the FHA was forced to pay millions of dollars in insurance claims inappropriately.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Federal False Claims Act, individuals or whistleblowers with information regarding abuses impacting securities regulated by the Securities and Exchange Commission or commodities regulated by the Commodities Futures Trading Commission, or fraud against the federal government, may be entitled to significant rewards. These rewards can range from ten to thirty percent of penalties, restitution, and damages derived from successful enforcement actions brought by the government relating to losses by investors or the government, or from private qui tam law suits brought by whistleblowers.

If you have knowledge regarding any of the above-described mortgage underwriting practices at JPMorgan Chase Bank, Washington Mutual, Bear Stearns Residential Mortgage, Bank of America, Countrywide, Citigroup, HSBC, or any other FHA-approved lender that engaged in the conduct described above, you may qualify as a whistleblower under federal law. Please contact paralegal Alicia Novak or attorneys Gretchen Obrist, Laura Gerber, or Lynn Sarko at 800.776.6044 or via email at info@kellerrohrback.com for more information.