Reverse Mortgage Servicer Settles Alleged FCA Violations with DOJ for $4.25 Million

On December 21, 2018, the U.S. Department of Justice (DOJ) announced a settlement with a mortgage servic​er for $4.25 million, resolving allegations of unlawful reverse mortgage servicing practices.

According to the DOJ, the company violated the False Claims Act with respect to its servicing of reverse mortgages, or Home Equity Conversion Mortgage (HECM) loans, which are loans that permit borrowers to borrow money against the equity in their homes.  The HECM loans at issue were federally insured by the Federal Housing Administration (FHA), which reimburses lenders in the event a borrower defaults on a loan.  Here, DOJ alleged that the company received payments for interest on loans from FHA even though the loans did not meet the regulatory requirements for recoupment, including, among other things, the meeting of deadlines relating to obtaining property appraisals and for commencing and prosecuting foreclosure proceedings.  The DOJ claimed that the company unlawfully obtained payments from FHA for loan losses over a nearly five-year period, between November 2011 and May 2016.

The U.S. Attorney for the Middle District of Florida prosecuted the action.