SAN DIEGO (CNS) – A San Diego-based mortgage lender has agreed to pay nearly $25 million to resolve allegations that it knowingly approved ineligible loans that later defaulted, resulting in mortgage insurance claims to the Federal Housing Administration, the Department of Justice announced Thursday.
Guild Mortgage Company, which is headquartered in San Diego and has branches across the country, allegedly violated the False Claims Act by knowingly breaching material program requirements while it originated and underwrote mortgages insured by the FHA.
According to the Department of Justice, participants in the FHA mortgage insurance program — such as Guild — can originate and underwrite mortgages without first having the government review the loans for compliance with FHA’s underwriting and origination requirements. If the loan defaults, loan holders can recover certain losses from the United States, according to the DOJ.
The settlement resolves allegations that Guild approved ineligible loans, failed to comply with material program rules that require lenders to maintain quality control and failed to self-report materially deficient loans that it identified.
“The Federal Housing Administration insurance program is a critical tool that helps hardworking Americans achieve their dream of homeownership. Any abuse of that program is unacceptable and the bad actors will be held accountable,” said Rae Oliver Davis, U.S. Department of Housing and Urban Development Inspector General.
According to the DOJ, the settlement resolves allegations brought by Guild’s former head of quality control, Kevin Dougherty, who sued under the whistleblower provisions of the False Claims Act, which allows private parties to sue on behalf of the government for false claims.
Dougherty will receive $4,980,000 of the settlement funds, the DOJ said.
“As this settlement demonstrates, we are committed to holding mortgage lenders accountable when they choose to abuse the integrity of vital government programs that are designed to assist homeownership,” U.S. Attorney Robert Brewer said. “We also commend the whistleblower for coming forward, exposing these wrongs, and working with the government investigative team.”