Mortgage Company Set to Payout $74.5 Million for U.S. Mortgage Probes
PHH Corp, a Mount Laurel, New Jersey-based mortgage company, will pay $74.5 million to resolve the claim that the company generated defective loans that were insured by the federal government then bought by Fannie Mae and Freddie Mac, according to the U.S. Justice Department. The deal comes after settlements between the Justice Department and financial companies over careless mortgage loans after the 2007-2009 financial crisis.
According to Gregory Brooker, the acting U.S. attorney in Minnesota, where the company’s PHH Home Loans operates, which was also involved in the deal, this is a “significant resolution” that aims to help “rectify the misconduct by returning more than $74 million in wrongfully claimed funds to the government.” PHH reported in a statement that it cooperated with investigations to its fullest extent, leading to the settlement agreements. Investigations first began with the first subpoenas in 2013, when the company agreed to resolve the probes without having admitted to liability for the alleged wrongdoing.
The company has been legally successful in challenging the constitutionality of the U.S. Consumer Financial Protection Bureau (CFPB). The challenge came after the company was fined over alleged illegal kickbacks by the regulator. PHH had argued the bureau’s director was given more power than the Constitution allows, which the Justice Department agreed with during oral arguments that took place before an 11-judge federal appellate court.
However, in the recent court case, the Justice Department was not as congruent with the company. The Department criticized PHH for its failure to comply with particular initiation, underwriting and quality control requirements set forth by the U.S. Federal Housing Administration, the U.S. Veterans Affairs Department, Fannie Mae and Freddie Mac. According to the Justice Department, from 2006 to 2011, PHH certified ineligible home loans for FHA insurance which led to substantial losses for the government when insurance claims were paid for those mortgages. Additionally, the company submitted ineligible loans for coverage through a Veterans Affairs Department program. The program was meant to help members of the military and veterans purchase homes.
Ineligible loans were also originated and sold by PHH to mortgage giants Fannie Mae and Freddie Mac. These were seized and put into a conservatorship by the Federal Housing Finance Agency in 2008, according to the Justice Department. A whistleblower lawsuit filed by a former employee of PHH led to this lawsuit and settlement. The employee will receive $9.1 million from the settlements.
If you are working for a company that is participating in unscrupulous business practices, it is your right to blow the whistle on the misconduct. Contact our team at Bochetto & Lentz today to get the legal advice you need for the complicated process of a whistleblower claim.