Mortgage Lending Company PPH Agrees to Pay $74 Million Settlement to Resolve Alleged False Claims Act Violations
The government’s crackdown on fraud and abuse has netted several companies who allegedly conspired to put both taxpayers and borrows at risk of significant financial losses. Last week, the Justice Department announced that mortgage lenders PPH. Corp, PPH Mortgage Corp. and PPH Home Loans have collectively agreed to pay it more than $74 million to resolve allegations that they knowingly originated and underwrote mortgage loans that did not meet applicable requirements for said loans. These loans were insured by agencies such as the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA) and guaranteed by the United States Department of Veterans Affairs (VA), and purchased by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). PPH is slated to pay $65 million to the FHA and $9.45 million to the VA and FHFA.
“Government mortgage programs designed to assist homeowners — including programs offered by the FHA, VA, Fannie Mae and Freddie Mac — depend on lenders to approve only eligible loans,” said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division. “The Department has and will continue to hold accountable lenders that knowingly cause the government to guarantee, insure, or purchase loans that are materially deficient and put both the homeowner and the taxpayers at risk.” Since January 2006, PPH has participated as a Direct Endorsement lender (DEL) in the FHA insurance program. As a DEL, PPH had the authority to originate, underwrite, and endorse mortgages for the FHA. Additionally, since PPH participated as a DEL, it was required to follow certain program rules for properly underwriting and certifying mortgages for the FHA.
As part of the settlement, PPH admitted to the following facts concerning the FHA loans:
- It failed to document borrowers’ creditworthiness including employment verification, credit reports etc.
- It failed to verify borrowers’ debt-to-income ratio.
- It failed to verify borrowers’ minimum statutory investment for their loan.
Moreover, PPH did not self-report any material violations of FHA requirements to HUD as required by the FHA until after 2013. It was first required to do so in 2006. As a result of these omissions and PPH’s conduct, PPH admitted that the loans they endorsed were not eligible for FHA mortgage insurance. This, the government maintains, caused HUD to incur substantial loses when it paid insurance claims on those loans. The settlement also resolves the government’s claims that PPH originated VA loans that did not meet that agency’s requirements. Finally, the settlement resolves the government’s allegations that PPH originated and sold loans to Freddie Mac and Fannie Mae that did not meet their requirements.
“This settlement resolves allegations of reckless origination and underwriting of VA guaranteed mortgage loans,” said Michael J. Missal, Inspector General, for the Office of Inspector General for the Department of Veterans Affairs (VA OIG). “It sends a clear message that the VA OIG will aggressively protect the integrity of this crucial program which helps so many of our veterans buy, build, or repair their homes. I would also like to thank the U.S. Attorney’s Offices for partnering with us to achieve this significant result.” The allegations resolved by these settlements came about as a result of a whistleblower lawsuit that was filed under the False Claims Act by Mary Bozzelli. Bozzelli is a former PPH employer who is scheduled to receive $9,067,377.33 from the settlements.