Movement Mortgage To Pay $23.75M To Settle False Claims Act Probe
Lender accused of not following guidelines for originating, underwriting some FHA, VA loans.
- Settlement resolves whistleblower allegations that lender failed to comply rules for lenders of government-backed loans.
- The whistleblowers, 2 former Movement employees, will receive more than $4 million of the settlement proceeds.
- Movement said the settlement is 'not an admission of any legal liability.'
Movement Mortgage LLC has reached an agreement with the Justice Department to pay nearly $24 million to resolve whistleblower allegations that it failed to follow guidelines for originating and underwriting loans backed by the federal government.
The settlement agreement, which includes a penalty of $23.75 million, was announced June 29 by the U.S. Attorney’s Office for the Northern District of New York. Movement Mortgage is based in Indian Land, S.C., but underwrites loans across the United States, including in upstate New York.
According to U.S. Attorney Carla B. Freedman, Movement Mortgage violated the federal False Claims Act by “failing to comply with material program requirements” when it originated and underwrote mortgages insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
“Lenders participating in mortgage programs backed by taxpayers must follow rules designed to protect both program integrity and homeowners,” Freedman said. She added that the settlement “holds Movement Mortgage accountable for its past violations, while acknowledging that it has taken steps to strengthen its internal controls to ensure future compliance with FHA and VA requirements.”
The settlement resolves allegations raised in 2018 by Jennifer McNeil, a former underwriter, and Ledell Javon Wilson, a former quality control team lead, in a lawsuit filed under provisions of the False Claims Act federal court in New York. The lawsuit triggered the investigation, which was conducted by the U.S. Attorney’s Office for the Northern District of New York, the Department of Justice’s Civil Division, HUD, HUD Office of Inspector General (OIG) and VA OIG.
In their lawsuit, McNeil and Wilson alleged that Movement Mortgage failed to comply with material program rules that require lenders to maintain quality control programs to prevent and correct underwriting deficiencies, self-report any materially deficient loans that they identify, and ensure that the underwriting process is free from conflicts of interest.
As part of the settlement, Movement Mortgage admitted that it certified for FHA mortgage insurance and VA home loan guarantees a “material percentage of loans that did not meet applicable requirements” and, therefore, were not eligible under those programs, despite inaccurately representing to HUD and the VA that such loans complied with applicable program requirements.
The lender also acknowledged that HUD and the VA would not have insured or guaranteed the loans except for its submission of false certifications. Movement Mortgage further admitted that it failed to adhere to HUD and the VA’s applicable self-reporting requirements.
According to the U.S. Attorney’s Office, the covered conduct occurred as far back as July 2008, including a period of rapid expansion by the company.
Because Movement Mortgage took significant measures to stop the practices, both before and after being notified of the federal investigation, it received credit for doing so in connection with the settlement, the U.S. Attorney’s Office said.
Provisions under the False Claims Act allow private individuals, known as “relators,” to file civil actions on behalf of the government, and to share in any recovery. As a result, McNeil and Wilson will receive a total of $4,037,566 of the settlement proceeds.
“HUD is committed to protecting public funds by ensuring that lenders follow the rules for origination of FHA-insured mortgages,” said Damon Smith, General Counsel for HUD. “Through this settlement, Movement Mortgage is accepting responsibility for its past actions by fully repaying the FHA insurance fund for its losses on defaulted loans that should not have been issued.”
In a statement, Movement Mortgage said the settlement is “not an admission of any legal liability.”
The company added that, “The relevant loans, some dating back 15 years, make up less than a half percent of our total federal loans originated during this time frame. We believe we have addressed these problems and agreed to the settlement so we can move on and continue to focus on our mission.”