Department of Justice Announces $13.2 Million Agreement by Universal American Mortgage Company LLC (UAMC) for False Claims Act Allegations

On October 19, 2019, the Department of Justice announced another large settlement of False Claim Act allegations. The essence of the allegations was that the mortgage company falsely certified that it had complied with the mortgage insurance requirements of the Federal Housing Authority – with regards to specific loans.  The DOJ announced that the requirements were there for a legitimate reason – to minimize the odds that borrowers would default on their loans – which would waste valuable federal funds.

The Assistant Attorney General stated that the DOJ will hold entities such as UAMC accountable if they don’t follow FHA guidelines.  FHA mortgages help many homebuyers purchase a home. The ability to obtain an FHA mortgage became harder for many first-time home purchases due to the economic crash of 2008.

U.S. Attorney Annette L. Hayes for the Western District of Washington said that “Not only does this harm the borrowers leaving them over their heads in debt and underwater on their mortgages, it harms taxpayers because the mortgages are backed by government insurance.  This settlement should serve as a warning to other lenders to diligently follow the rules.”

The claim against Universal American Mortgage Company LLC

The reason that the False Claims Act charges were essential in the UAMC case was that the FHA relies on “direct endorsement lenders (DELs)” to follow the FHA requirements because the FHA doesn’t itself review whether the loan complies with the FHA rules. Instead, the FHA relies on the DEL, which has the “authority to originate, underwrite, and endorse” the FHA mortgage. When a default happens, as is more likely if the FHA requirements aren’t followed, the loan holder can request that the Housing and Urban Development (HUD) department pay for the losses due to the default. HUD is the parent agency for the FHA.

The DOJ claimed that UAMC, between 2006 and 2011 submitted numerous loans that it knew didn’t meet the FHA requirements. The DOJ also claimed that UAMC knowingly failed to conduct quality control reviews and “improperly incentivized underwriters.”

The role of a whistleblower in the UAMC False Claims Act settlement

The claim against UAMC originated from a whistleblower who was a “former employee of a related UAMC entity.” Whistleblowers, who usually work with experienced whistleblower lawyers, are entitled to a percentage of the recovery. According to the DOJ, the whistleblower in this case will receive $1,980,000 from the settlement.

Stephen Danz & Associates is an experienced California False Claims Act law firm. We counsel whistleblowers in the requirements for starting a whistleblower claim. We represent them throughout the litigation process and work with the Department of Justice. For immediate help with a whistleblower claim, please call us at 877-789-9707 today.