The U.S. Department of Justice Tuesday sued Allied Home Mortgage Capital Corp. and two executives — including founder Jim Hodge — accusing them of fraudulent lending practices tied to hundreds of millions of dollars in government-backed loans.
In a brief interview with National Mortgage News early Tuesday afternoon, Hodge, CEO of the firm, said he had not yet seen the notice of charges and was given no forewarning of the lawsuit. "I'm totally unaware of it," he said.
He added that the firm - an active lender - plans to comment once it sees the notice of civil allegations.
The lawsuit, filed in Manhattan federal court, charges that the Houston-based Allied — once considered the industry's largest net branch operator — engaged in "reckless" lending practices, disregarded underwriting requirements of the FHA program, and repeatedly misled the agency on compliance.
The civil fraud suit seeks triple damages under the False Claims Act against the lender, Hodge, and EVP Jeanne Stell.
DOJ claims that nearly 32% of the 112,324 loans the firm facilitated between 2001 and 2010 went delinquent, resulting in roughly $834 million of insurance claims paid by FHA.
In 2006 and in 2007, the firm's default rate reached 55%, the government says.
"Allied's decade of concealed misconduct has resulted in tens of thousands of defaulted loans, thousands of American homeowners facing eviction and hundreds of millions of dollars in losses to the United States," prosecutors charge.
