The DOJ announced earlier this month that a pair of Utah-based mortgage companies–Primary Residential Mortgage Inc. and Security National Mortgage Company–agreed to settlements of $5 million and $4.25 million, respectively, to settle separate false claims act suits relating to their originating and underwriting of mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.
Both lenders operated as Direct Endorsement Lenders (DELs) in the FHA insurance program. The lenders obtained HUD insurance by claiming that their underwriting showed that the borrowers met HUD standards for creditworthiness and eligibility even though they knew that the borrowers did not meet such standards. If an insured loan later defaults, the holder can “submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.” That apparently happened in this case.
It appears that neither suit involved a whistleblower, which means the government discovered the violations and brought the claims directly.
