Mortgage Fraud

Widespread Fraud Led to Mortgage Crises

The catalyst of the Great Recession was the failure of the mortgage market which in turn was partially caused by the fraud that subverted the checks and balances in place to prevent mortgage defaults.  As a result of this fraud, the entire economy suffered and the Federal Housing Administration (FHA), which insured many of the mortgages that ultimately defaulted, took massive losses.

“Misconduct in the mortgage industry helped lead to a destructive financial crisis that spanned the globe.” – U.S. Attorney Brian Stretch for the Northern District of California

The goal of FHA is to help creditworthy low income and first time homebuyers—individuals and families often denied traditional credit—to obtain a mortgage and purchase a home.  The FHA and ultimately the taxpayers, accomplish this goal by insuring qualifying loans against default, thereby reducing the lenders’ risk in making such loans.  However, to manage its own risk and the risk of FHA insured borrowers, the FHA requires lenders to comply with several conditions to certify that borrowers meet FHA mandated credit standards.  Although, in pursuit of loan origination commissions and disregard for the taxpayers who would ultimately foot the bill, many lenders simply certified that borrowers met these credit standards and were eligible for FHA mortgage insurance, when in fact they were not.

Mortgage Fraud Under The False Claims Act

These misrepresentations, which are actionable under the False Claims Act, caused families across the country to lose their homes and billions of dollars of damages to the FHA and ultimately to the taxpayers.  Some of the actionable conduct that caused the FHA to insure ineligible loans included: failing to verify a borrower’s employment, assets, or credit in accordance with FHA’s requirements; materially overstating a borrower’s income, assets, or willingness to repay the mortgage loan; materially understating a borrower’s liabilities or ability to repay the mortgage loans; and failing to ensure the property provides adequate collateral for the mortgage loan often done by performing inadequate or misleading property appraisals.

“We remain committed to protecting the public fisc from all who seek to abuse it, whether they do business on Wall Street or Main Street.” – Principal Deputy Assistant Attorney General Benjamin C. Mizer

The significant malfeasance in FHA mortgage fraud is evident from examining few of the recent False Claims Act FHA fraud settlements.  For instance, SunTrust Bank, who ultimately settled FHA fraud allegations for $418 million in 2014, admitted that its own internal audits notified senior management that as much as 50% or more of SunTrust’s FHA-insured mortgages did not comply with FHA requirements.  In an 2015 settlement with First Tennessee Bank, the bank internally acknowledged that hundreds of its FHA loans had material deficiencies and despite its obligation to report material deficiencies to the FHA, did not report one.  First Tennessee paid $212.5 million to settle FHA fraud allegations.  In April 2016, Wells Fargo agreed to the largest FHA loan fraud settlement to date of $1.2 billion.  Commenting on that case, U.S. Attorney for the Southern District of New York Preet Bharara stated: “Wells Fargo, one of the biggest mortgage lenders in the world, has been held responsible for years of reckless underwriting, while relying on government insurance to deal with the damage.”

Our Attorneys are National Qui Tam Experts and Trial Lawyers.

“The Accomplishments of Frohsin Barger & Walthall warrant the wealth of accolades that it has received.” — Benchmark Plaintiff

Jim Barger and Elliott Walthall are the only private attorneys general in the country ever to be tapped as part of a Department of Justice trial team in a Medicare fraud jury trial.  A noted expert on the False Claims Act, Jim Barger teaches upper level courses on the subject as an adjunct professor at the University of Alabama School of Law, which was ranked among the top 15 law schools in the nation by Business Insider in 2016. Barger has appeared on HuffPost Live, Fox 6 Atlanta, and NPR and his opinions regularly are sought by major newspaper outlets on False Claims Act Medicare enforcement, including The New York Times and The Washington Post.

Both Jim Barger and Elliott Walthall have spoken on national panels about Medicare fraud for the American Bar Association, the American Association for Justice, and Taxpayers Against Fraud. In 2015, Barger was a featured symposium speaker on Medicare Fraud and the False Claims Act at the Georgetown Law Center in Washington, DC. and in 2016, Georgetown’s American Criminal Law Review published a new research article by Barger on the public-private partnership of the False Claims Act.

Frohsin Barger & Walthall Represents Whistleblowers Nationwide.

Frohsin Barger & Walthall investigates and litigates qui tam actions on behalf of whistleblowers in federal and state actions across the country. Our representation includes evaluating, investigating, and filing qui tam actions as well as assisting prosecutors and investigative agents in pursuing cases and reaching settlements, with a high-percentage of our cases resulting in government intervention. We have sealed cases in multiple states across the country and regularly travel to meet with United States Attorney’s offices, State Attorney General Offices, and United States Department of Justice attorneys in Washington, DC.

Protection for Whistleblowers

Blowing the whistle on corporate fraud takes courage, and the law rewards that courage with certain protections. We understand that perhaps the most important aspect of representing corporate whistleblowers is guiding and protecting them through the difficult, stressful process of litigation. The False Claims Act provides for a whistleblower’s case to be filed under seal and for the identity of the whistleblower to be protected during the course of the government’s investigation. Further, federal laws protect against retaliation by mandating the reinstatement of wrongfully fired employees at the same seniority level, and an award of double back pay, interest, and attorneys’ fees. Finally, successful whistleblowers are entitled to substantial rewards, including up to 30% of any False Claims Act recovery which Congress has mandated is three times the amount of fraud that is proven through the whistleblower’s allegations plus substantial civil penalties.