PHH Corp to Pay $74.45M for False Claims Act Liability in Florida
PHH Corp., PHH Mortgage Corp., and PHH Home Loans (collectively, PHH) have agreed to pay the United States $74,453,802 to resolve allegations that they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) that did not meet applicable requirements, the Justice Department announced today.
PHH is headquartered in Mount Laurel, New Jersey, and PHH Home Loans operates in Edina, Minnesota. PHH has agreed to pay $65 million to resolve the FHA allegations and $9.45 million to resolve the VA and FHFA allegations.
"Government mortgage programs designed to assist homeowners — including programs offered by the FHA, VA, Fannie Mae and Freddie Mac — depend on lenders to approve only eligible loans," said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division. "The Department has and will continue to hold accountable lenders that knowingly cause the government to guarantee, insure, or purchase loans that are materially deficient and put both the homeowner and the taxpayers at risk."
"PHH submitted defective loans for government insurance, and homeowners and taxpayers paid the price. This significant resolution helps rectify the misconduct by returning more than $74 million in wrongfully claimed funds to the government," said Acting U.S. Attorney for the District of Minnesota Gregory Brooker. "I commend the efforts of this Office’s Civil Division in reaching a successful resolution."
This settlement requires PHH to pay back to the taxpayers of the United States millions of dollars in loans that never should have been made, said Acting U.S. Attorney William E. Fitzpatrick for the District of New Jersey. By failing to ensure the creditworthiness of borrowers and otherwise failing to make sure the loans met HUD underwriting requirements, loans were insured by FHA that should not have been.
"By failing to comply with FHA regulations, PHH put taxpayers and borrowers at risk of sustaining significant financial losses," stated Acting U.S. Attorney Benjamin G. Greenberg. "This case and the resulting $75 million dollar settlement demonstrate that U.S. Attorney’s Offices and our investigative partners across the country are committed to holding lenders accountable who knowingly submit unqualified loans and compromise needed governmental programs."
Since at least January 2006, PHH has participated as a Direct Endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, the FHA does not review a loan before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, but instead relies on the efforts of the DEL to verify compliance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting an
"For government mortgage programs to assist homeowners but not take on ill-advised risk, all participants in the mortgage lending process must provide true and complete information," stated Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York. "Today’s settlement with PHH demonstrates our continuing commitment to requiring such integrity in the process."
Mandatory Facts:
Defendant: PHH Corp.
Criminal Charges: Violated the False Claims Act.
City and State: Mount Laurel, New Jersey, and Edina, Minnesota.
Exact Date: January 2006 (participation in FHA insurance program).
Sentence or Outcome: PHH Corp. agreed to pay $74,453,802 to resolve allegations.
Dollar Amounts: $65 million to resolve FHA allegations and $9.45 million to resolve VA and FHFA allegations.
Key Facts
- State: Florida
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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