A Utah-based mortgage company has agreed to pay nearly $40 million to settle allegations that it improperly originated and underwrote mortgages insured by the federal government.
According to a U.S. Department of Justice news release, Academy Mortgage Corp., based in Draper, Utah, did not admit guilt in agreeing to pay $38.5 million to resolve allegations it violated the U.S. False Claims Act by improperly issuing mortgages insured by the Federal Housing Administration (FHA).
The settlement, announced Wednesday, resolves a lawsuit filed by Gwen Thrower, a former Academy underwriter, under the whistleblower provisions of the False Claims Act. The provisions allow a private party (known as a relator) to file a lawsuit on behalf of the U.S. and to receive a portion of any recovery.
In her lawsuit filed in the Northern District of California, Thrower claimed that from January 2008 through April 2017, Academy had an underwriting process that led employees to disregard FHA rules and falsely certify compliance with underwriting requirements. She also alleged that, as a result of Academy’s knowingly deficient underwriting practices, the government paid insurance claims on loans that were improperly underwritten.
Under terms of the settlement, Academy will pay $38.5 million to the United States. Thrower will receive $11,511,500 as her share of the proceeds.
“Lenders that knowingly cause the government to guarantee loans that are materially deficient put both homeowners and the public fisc at risk,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. He said the settlement “is a result of the relator’s efforts to develop this case in litigation and complements the department’s actions to prevent abuse of government programs designed to foster home ownership.”
In response to a request for comment from NMP, Dennill Tolbert, vice president of communications at Academy Mortgage, provided the following statement:
"Since 2016, Academy Mortgage has been engaged in a lawsuit in the Northern District of California. Despite the U.S. Government asking the court to dismiss the case multiple times, Academy made a business decision to settle the case to mitigate additional costs and disruption of further litigation. As stated by the Department of Justice, 'The claims resolved by the settlement are allegations only and there has been no determination of liability.'”
The case United States of America ex rel. Gwen Thrower v. Academy Mortgage Corp., No. 3:16-cv-2120-EMC, and was monitored by the U.S. Attorney’s Office for the Northern District of California and the Civil Division’s Commercial Litigation Branch.
The Justice Department said it has recovered billions of dollars under the False Claims Act from other lenders accused of knowingly violating FHA underwriting requirements.
