A federal jury has found Jim C. Hodge and his former mortgage empire, Allied Home Mortgage Capital Corporation and Allied Home Mortgage Corporation, liable for a decade-long campaign of civil mortgage fraud that cost U.S. taxpayers over $92 million. After a five-week trial in Houston, the jury delivered a unanimous verdict holding the entities and Hodge accountable for systematically defrauding the Federal Housing Administration’s mortgage insurance program through a network of unapproved ‘shadow’ branches.
The United States was awarded $92,982,775 in damages, including $7,370,132 directly against Hodge, the company’s president and CEO. Under the False Claims Act, those damages will be automatically tripled, and the court will later determine additional penalties of $5,500 to $11,000 per violation. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 also allows for further statutory penalties, which will be imposed at a later date.
As a HUD-approved loan correspondent, Allied Home Mortgage Capital Corporation was required to obtain federal approval for every branch originating FHA-insured loans. Instead, with Hodge’s knowledge and approval, the company operated more than 100 unregistered ‘shadow’ offices nationwide. These branches originated thousands of high-risk loans that were falsely certified as compliant, exposing the FHA insurance fund to massive losses on mortgages that never should have been insured.
HUD relies on lenders to self-certify compliance to assess default risk and maintain the integrity of the insurance program. The jury heard evidence that Allied and Hodge exploited this trust, submitting false documentation and hiding the true scale of their operations to maximize profits while shifting risk to taxpayers. The fraud spanned more than ten years, directly undermining federal safeguards meant to protect affordable homeownership.
“For years, Jim Hodge and Allied lied to HUD in order to fraudulently reap profits,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “After a month-long public trial where all their misconduct was exposed, a jury has held Mr. Hodge and Allied responsible for their lies and has made them pay for losses the United States suffered on loans that would never have been insured by HUD absent their lies.”
U.S. Attorneys Kenneth Magidson of the Southern District of Texas and HUD Inspector General David A. Montoya hailed the verdict as a landmark win in the fight against systemic fraud in federal housing programs. “This should serve as a notice to all those determined to engage in illegal schemes such as these that they are not beyond the reach of the federal law enforcement community,” Montoya said. The trial was conducted before U.S. District Judge George C. Hanks, Jr., in Houston.
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Key Facts
- State: New York
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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