Qui Tam

National City Mortgage to Pay $4.6 Million to Settle False Claims Allegations Involving Federally Insured Mortgages

By Zachary A. Kitts

National City Mortgage to Pay $4.6 Million to Settle False Claims Allegations Involving Federally Insured Mortgages

    WASHINGTON, May 22 /PRNewswire-USNewswire/ -- National City Mortgage
Inc. has agreed to pay the United States $4.6 million to settle allegations
arising under the False Claims Act concerning 58 federally insured loans
for mortgages submitted to the Department of Housing and Urban Development
(HUD), the Justice Department announced today.

    National City, a mortgage lender headquartered in Miamisburg, Ohio, has
"direct endorsement" authority to underwrite HUD-insured mortgage loans and
submit them to HUD for insurance endorsement. Direct endorsement is a
mechanism that allows a pre-approved lender to loan a low or moderate
income borrower money for a mortgage, and protects that lender against loss
in case of default. This program helps low and moderate income families
become homeowners by lowering some of the costs associated with mortgage
loans and providing protection to lenders. Lenders are encouraged to make
loans to borrowers who might not be able to meet conventional underwriting
requirements but are otherwise creditworthy.

    HUD regulations require that the lender make certain certifications to
the Federal Housing Administration (FHA) when it is submitting loans for
insurance coverage more than 60 days from the loan closing, referred to as
"late endorsement loans." One such certification and requirement is that
the loan payment is not more than 30 days past due when submitted for FHA
insurance coverage. The government alleges that National City improperly
submitted 58 late endorsement loans for FHA insurance coverage that were
not current, in violation of FHA regulations.

    "HUD's vital mortgage insurance programs assist lenders that make the
American dream of home ownership accessible to more people, but lenders
must follow HUD's rules and be held accountable if they knowingly submit
loans that are not eligible for insurance," said Gregory G. Katsas, acting
Assistant Attorney General for the Justice Department's Civil Division.

    "This settlement shows this district's serious commitment to stamping
out fraud and maintaining the integrity of the federally insured mortgage
program," said Stephen J. Murphy, U.S. Attorney for the Eastern District of
Michigan. "This office will continue to use all tools available to it,
including civil enforcement, to protect all government programs and the
people who benefit from them."

    The case was handled jointly by the Justice Department's Civil Division
and the U.S. Attorney's Office for the Eastern District of Michigan in
Detroit, with investigative assistance provided by HUD's Office of the
Inspector General.

Full post as published by Virginia Qui Tam Law on May 23, 2008 (boomark / email).