In the wake of the 2008 financial crisis, and the staggering bailouts given out to some of the largest financial institutions, the past practices of those institutions have undergone heavy scrutiny. As a result, many practices utilized by those organizations companies have been exposed as fraudulent.
For example, the Federal Housing Administration (FHA) guarantees certain mortgage loans provided by lenders across the United States. When lenders engaged in misconduct with regard to mortgage loan documentation, which resulted in the making of loans to unqualified borrowers and,in turn, the submission of claims to the Federal Government on the mortgage guarantees, the lenders' conduct may well have violated False Claims Act.
Such misconduct can include practices such as allowing borrowers to self-certify income or assets without objective documentation, improper bonusing of employees and managers to push through loan packages for unqualified borrowers, and “Robo-signing” of loan foreclosure documents – the systematic process used by some financial institutions in signing huge numbers of documents without reading or verifying the contents of the documents. As a result, many financial institutions are now under strict monitoring programs by the Department of Justice and Office of the Controller of the Currency (the OCC) and face exposure for actions brought under the False Claims Act.
Real World Examples of Recent Loan Documentation Fraud False Claims Act Cases:
- 2012: Bank of America, Ally Financial, Citigroup, J.P. Morgan Chase, and Wells Fargo agreed to pay the government $95 million to resolve false claims allegations that the companies made false claims on mortgage guarantees. Specifically, it was alleged that the companies charged improper costs, used false documents, engaged in misconduct regarding servicing, and failed to obtain mortgage assignments as required. The whistleblowers received $18 million as a result of the settlement.