Mortgage Lender Found to Have Violated False Claims Act

According to the U.S. Department of Justice, Guaranteed Rate Inc. agreed to pay $15.06 million to resolve allegations it violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. 

The report said the company knowingly violated program requirements when it originated and underwrote mortgages insured by the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) or the Department of Veteran Affairs (VA). 

“The department works with our partners at HUD and the VA to protect vital federal lending programs,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “We will continue to protect American taxpayers and homebuyers by holding accountable FHA and VA lenders that knowingly and materially violate program requirements.”

Requests for comment from Guaranteed Rate have not been returned. 

U.S. Attorney Grant C. Jaquith for the Northern District of New York said lenders participating in mortgage programs backed by taxpayers “must follow rules” designed to protect both the program and homeowners. 

“Today’s settlement holds Guaranteed Rate accountable for its past violations and reflects that it has strengthened its internal controls to ensure future compliance with Federal Housing Administration and Department of Veterans Affairs requirements,” he said. 

Lenders in FHA insurance and VA guarantee programs have the authority to originate and underwrite mortgage loans without having the government review the loans for compliance with the agency’s underwriting and origination requirements.

Additionally, if an FHA insured and VA guaranteed loan defaults, the holder of the loan may submit a claim to the U.S. for losses. Lenders are required to follow FHA and VA rules to ensure that mortgages that meet credit and underwriting criteria are insured or guaranteed by the government.  

The Department of Justice says the conduct was traced back as far as January 2008, but the company took “significant measures” to stop the practices, before and after being notified of the investigation. The release says Guaranteed Rate received credit for taking measures to fix the issue. 

“This case involved a pattern of serious, systemic, and widespread violations under the False Claims Act,” said Rae Oliver Davis, Inspector General, U.S. Department of Housing and Urban Development.  “This recovery on behalf of FHA and the American taxpayer should serve as a stark reminder of the potential consequences of not adhering to HUD program rules and to the value of whistleblowers, in pursuing lenders that violate these rules.”