The federal government has obtained a nearly $300 million judgment against Allied Home Mortgage entities over alleged fraudulent misconduct on government-insured loans.
In November 2016, a federal jury unanimously found that Allied had violated the False Claims Act and
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Allegedly, the violations came in the certification by the Houston-based company of ineligible mortgages insured by the Federal Housing Administration.
When the loans defaulted, insurance claims were submitted to FHA.
Allied also allegedly originated FHA loans through “shadow” branches that were not approved by the Department of Housing and Urban Development.
The actions enabled Allied to evade oversight and disguise default rates.
In addition, the home lender operated a dysfunctional, unqualified and understaffed quality-control department. The defendants are accused of submitting falsified QC reports to HUD auditors and falsely certifying it was in compliance with HUD QC guidelines.
The
qui tam whistleblower lawsuit was originally filed as a complaint-in-intervention during November 2011 in U.S. District Court for the Southern District of New York.
At the time, Allied was suspended as an FHA mortgagee.
A motion for a preliminary injunction preventing its suspension filed by Allied was granted only after it had already suspended originations and was unable to pay employees.
Allied filed its own lawsuit against HUD, but that case was
dismissed in August 2014.
The government’s action was transferred to U.S. District Court for the Southern District of Texas in September 2012.
The judgment was announced Tuesday by Acting U.S. Attorney for the Southern District of New York
Joon H. Kim.
Named as defendants are Allied Home Mortgage Capital Corp., Allied Home Mortgage Corp. and Allied President and Chief Executive Officer Jim C. Hodge.
A $296,298,325 judgment was issued against Allied, while a $25,340,496 judgment was issued against Hodge.
“Jim Hodge and Allied defrauded a federal mortgage insurance program designed to help spread the dream of homeownership, and then lied about it repeatedly,” Kim said in the statement. “A jury saw through their lies, and now the Court has imposed millions of dollars in additional penalties.
