False Claims Act Whistleblowers Receive $4 Million for Exposing Alleged Mortgage Fraud

Mortgage

On June 29, the United States Attorney’s Office for the Northern District of New York announced that Movement Mortgage, LLC, has agreed to pay the United States $23.75 million to resolve allegations that it violated the False Claims Act (FCA). The government alleges that Movement Mortgage failed to comply with program requirements when it originated and underwrote mortgages insured by the Department of Housing and Urban Development’s (HUD), Federal Housing Administration (FHA), or guaranteed by the Department of Veterans Affairs (VA). Movement Mortgage is based in South Carolina and underwrites loans across the country, including in upstate New York, where the allegations stem from. 

Two former employees of Movement Mortgage blew the whistle on the company by filing a civil suit under the qui tam provision of the FCA. Qui tam claims enable private citizens to file lawsuits on behalf of the government if they know of an individual or company defrauding the government. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery. The whistleblowers in this case will receive $4,037,566. 

“Lenders participating in mortgage programs backed by taxpayers must follow rules designed to protect both program integrity and homeowners,” said United States Attorney Freedman. “Today’s settlement holds Movement Mortgage accountable for its past violations, while acknowledging that it has taken steps to strengthen its internal controls to ensure future compliance with FHA and VA requirements.”

“HUD is committed to protecting public funds by ensuring that lenders follow the rules for origination of FHA-insured mortgages,” said Damon Smith, General Counsel for HUD. “Through this settlement, Movement Mortgage is accepting responsibility for its past actions by fully repaying the FHA insurance fund for its losses on defaulted loans that should not have been issued.”

“The integrity of the FHA loan program is essential to helping hard working citizens realize the American dream of homeownership,” said Special Agent in Charge Mark T. Kaminsky with HUD OIG Office of Investigation. “This case demonstrates HUD OIG’s enduring commitment to working with the Northern District of New York USAO to investigate and hold accountable those who seek to jeopardize this program and the health and stability of our nation’s housing market.”

“VA’s Home Loan Guaranty program provides valuable assistance to our nation’s veterans when purchasing or repairing their homes, and vendors must adhere to critical quality standards in order to maintain the integrity of the program,” said Special Agent in Charge Christopher F. Algieri with the Department of Veterans Affairs Office of Inspector General’s Northeast Field Office. “The VA OIG appreciates the work of the U.S. Attorney’s Office and our law enforcement partners throughout this important investigation.”

In recent weeks, the U.S. Supreme Court has issued two decisions in False Claims Act whistleblower cases. On June 16, the Supreme Court issued an 8-1 ruling in United States, ex rel. Polansky v. Executive Health Resources, Inc. The decision grants the DOJ the authority to dismiss qui tam whistleblower lawsuits in cases in which it chose not to intervene.

On June 1, the U.S. Supreme Court issued an unanimous decision in U.S. ex rel. Schutte v. SuperValu Inc. The decision, heralded as a major victory by whistleblower advocates, overturns U.S. Court of Appeals rulings which allowed fraudulent companies to escape liability under the False Claims Act if they could prove their fraudulent actions could be based on a “reasonable interpretation of the law” regardless of whether or not the company intended to commit fraud.

Further Reading:

Movement Mortgage to Pay $23.7 Million to Resolve Allegations it Caused the Submission of False Claims to Government Mortgage Programs

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