Fifth Third Bancorp has settled DOJ charges that it failed to report 1,400 defective mortgages for $85 million. It was discovered that these loans originated between 2003 and 2013 were not eligible for FHA insurance during post-closing quality reviews but the company did not report the problems to the government until 2012.
The lawsuit was initiated by a whistleblower complaint under the False Claims Act before the company voluntarily self-reported. The whistleblower was represented by a local Philadelphia whistleblower law firm – congratulations to them and their client on good work.
JPMorgan, Citi, Bank of America and U.S. Bancorp have all settled mortgage fraud lawsuits alleging they failed to follow the FHA’s underwriting standards in insured loans.
The most high profile lawsuit this year has been Quicken Loans, which filed a declaratory judgment action against the Federal Government in the Eastern District of Michigan a few days before the Department of Justice filed its complaint in the District of Columbia. The courts are now considering whether to dismiss or transfer the lawsuits.
A few banks have settled investigations into their conduct this year but non have reached the same lofty penalties as were announced last year, led by the $16.65 billion dollar Bank of America settlement.
We also saw the Department of Justice once again evaluate whether charges should be filed against any bank executives for their role in the financial crisis stemming from their mortgage lending and mortgage-backed securities trading. It is unclear whether they will take action in light of the criticism about their lack of prosecutions against executives but the recent Yates memo has indicated that the DOJ will be looking at bringing actions against the responsible individuals in current and future cases.
Whistleblowers have been a key ingredient in helping the government discover mortgage fraud. They are eligible for rewards under both the False Claims Act and FIRREA if they follow the appropriate procedures for the whistleblower laws.