Thanks to extensive news coverage and even a couple Hollywood blockbusters, we’re all painfully aware of the financial crisis of 2007-2008 and the ensuing collapse of the housing market. Many of our country’s largest banks have been hit with allegations of mortgage fraud. From January 2009 through the end of 2014, the Department of Justice recovered $4.65 billion for civil fraud and false claims against federal housing and mortgage programs. It’s estimated that the total cost of mortgage fraud to date is in the trillions of dollars.
If you have suspicions of mortgage fraud, there’s something you can do about it. The qui tam provisions of the False Claims Act allow whistleblowers to file actions alleging false claims on behalf of the government. This applies to cases where mortgages are insured or guaranteed by the government or entities that receive government funds.
After the financial crisis of 2008, the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) became heavily involved in the housing market, backing mortgages through loan guarantees and issuing mortgage insurance to allow lenders to hedge against mortgage defaults. Because the FHA and HUD are tied to federal funds, taking out mortgage insurance from these organizations for fraudulent loans or falsely making claims under those policies falls within the purview of the False Claims Act, allowing whistleblowers to bring mortgage fraud claims in relation to FHA-insured products.
As with all False Claims Act actions, a whistleblower can potentially receive a sizeable reward if mortgage fraud allegations lead to the government recovering funds. The reward can be as much as 30% of the amount recovered.
Implications for Fannie Mae and Freddie Mac
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are Government Sponsored Entities (GSEs) that were chartered by Congress as private companies. Together, Fannie Mae and Freddie Mac guarantee most residential mortgages in the U.S. And since 2009, Fannie and Freddie have fallen under the False Claims Act.
These two GSEs were two of the largest recipients of funds from the big bank bailout of 2009. At this time, Congress placed them under conservatorship to help ensure that they would stay afloat. Congress also passed the Fraud Enforcement and Recovery Act of 2009 (FERA), which extended the False Claims Act to claims involving recipients of bailout money, thereby covering Fannie Mae and Freddie Mac. Accordingly, whistleblowers can now make claims regarding mortgages and loans guaranteed by Fannie and Freddie and the reward provisions will apply.
Project On Government Oversight
Founded in 1981, the Project on Government Oversight (POGO) is an independent non-profit organization that investigates allegations against federal agencies, Congress, and government contractors in order to uncover corruption, fraud, and other misconduct. POGO works with whistleblowers to investigate claims of governmental impropriety. Allegations of mortgage fraud involving Fannie Mae and Freddie Mac, or other recipients of government funds, fall squarely with POGO’s purpose. In fact, in July 2012, POGO investigated Fannie Mae and Freddie Mac and found that the GSEs resisted turning documents over to inspectors. This led the watchdog group to call for greater oversight of organizations involved in the U.S. housing market.
POGO has several procedures in place for reporting misconduct. These are designed to protect the identity and confidentiality of whistleblowers and encourage them to come forward.
The idea of becoming a whistleblower can be unnerving. It takes a tremendous amount of courage to step up and expose fraud, especially in the face of something as daunting as the housing crisis. If you have suspicions of mortgage fraud, it’s important to have an experienced whistleblower attorney on your side. Whether you’re considering initiating a False Claims Act suit or reaching out to POGO, or if you just have questions about mortgage fraud and what you can do to stop it, Kreindler & Associates are here to help. As experienced fraud attorneys, we’ll help take the stress out of whistleblowing and help you decide how to best handle your situation. Contact us today for more information on how you can help stop mortgage fraud.
