Sierra Pacific Mortgage, False Claims Act, California 2023

SACRAMENTO, Calif. — In a shocking case of lending deception, Sierra Pacific Mortgage Company Inc. (SPM), a national mortgage lender headquartered in Folsom, has agreed to pay the United States $3,670,000 to resolve allegations that it violated the False Claims Act by falsely certifying compliance with Federal Housing Administration (FHA) mortgage insurance requirements in connection with certain loans.

According to the U.S. Attorney McGregor W. Scott, during the time period covered by the settlement, SPM participated as a direct endorsement lender (DEL) in the U.S. Department of Housing and Urban Development’s FHA insurance program. A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance.

The United States alleged that between April 2007 and June 2009, SPM knowingly submitted loans for FHA insurance that did not qualify. The United States further alleged that SPM failed to properly respond to internal warning signs that its loans were poorly underwritten and failed to properly implement a quality control program once it was aware of those warning signs.

When mortgage companies fail to follow lending standards, it harms both taxpayers and borrowers,” said U.S. Attorney Scott. “We will continue to work with HUD/FHA and our law enforcement partners to ensure the integrity of the FHA insurance program.”

Assistant Special Agent in Charge Tony Meeks, HUD-Office of Inspector General, added, “When unscrupulous lenders deliberately ignore HUD guidelines, it undermines the housing market and creates distrust between potential home buyers and federal programs designed to assist them. Our office is committed to ensuring the FHA insurance program will not be mismanaged, and we are committed to pursuing all acts of fraud, waste and abuse.”

The settlement was the result of a joint investigation conducted with HUD’s Office of Inspector General. Assistant U.S. Attorney Colleen M. Kennedy handled the case for the United States. The claims settled by this agreement are allegations only and there has been no determination of liability.

According to HUD General Counsel Paul Compton, “The wrongful actions of SPM were not minor mistakes or foot faults. There is no room at FHA for lenders who knowingly violate the trust placed in them as direct endorsement lenders.”

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