Lennar's mortgage unit settles False Claims Act charges for $13M

Lennar's mortgage banking unit agreed to settle False Claims Act allegations for $13.2 million, a smaller amount than other lenders paid to the government prior to the end of fiscal year 2017.

Department of Housing and Urban Development Secretary Ben Carson eased his agency's enforcement of the False Claims Act since assuming office. But the Justice Department is also responsible for bringing cases under the act; both agencies were a part of this settlement.

Universal American Mortgage, Lennar's Miami-based mortgage unit, was accused of submitting loans for Federal Housing Administration insurance between 2006 and 2011 that did not meet agency guidelines. During the period, Universal American was a direct endorsement lender, so the FHA did not review the loan for compliance prior to submission.

The investigation was conducted by HUD, the HUD Office of the Inspector General, the Justice Department Civil Division and the U.S. Attorneys for the Eastern and Western Districts of Washington.

"In a quest for profits, mortgage companies have ignored important lending standards," Annette L. Hayes, the U.S. Attorney for the Western District of Washington, said in a press release. "Not only does this harm the borrowers leaving them over their heads in debt and underwater on their mortgages, it harms taxpayers because the mortgages are backed by government insurance. This settlement should serve as a warning to other lenders to diligently follow the rules."

The government also alleged that Universal American improperly incentivized underwriters and failed to perform quality control reviews.

"One of our principle responsibilities is to protect and ensure the integrity of federal housing programs for the benefit of all Americans," Jeremy M. Kirkland, acting deputy inspector general of the HUD-OIG, said in the Justice Department press release. "This settlement demonstrates our resolve and should signal to irresponsible lenders that this conduct will not be tolerated."

There was no determination of Universal American's liability in this settlement, the press release said.

As part of the settlement, Kat Nguyen-Seligman, a former employee of a Universal American affiliate who filed a whistleblower suit on behalf of the government the under the FCA, will receive $1.98 million.

The dollar amount was not remarkable compared with the Iberiabank settlement from last December, where the Louisiana bank agreed to pay $11.7 billion.

During fiscal year 2017, the Justice Department reported $543 million in settlements and judgements from the False Claims Act, with $296 million of that from the jury verdict in the Allied Home Mortgage case.

But it also had a $75 million settlement with PHH and an $89 million settlement with reverse mortgage lender Financial Freedom during the year.

Wells Fargo made a $1.2 billion settlement during fiscal year 2016, while Freedom Mortgage paid $113 million as part of a total $1.6 billion in fines collected by the government.

Another 2018 False Claims Act settlement was with the accounting firm of Deloite & Touche for $149.5 million for its part in the failure of Taylor, Bean & Whitaker.