More False Claims Act Lawsuits Lie Ahead

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A recent group of Federal Housing Administration settlements with lenders serve as a reminder that False Claims Act lawsuits are not going away any time soon.

FCA claims typically involve allegations that a person or entity has defrauded the government. There are severe penalties and damages available under the False Claims Act and related statutes. In the mortgage context, claims can be asserted against lenders that sell loans insured by the government since the lender attests that every one of those loans has been originated in accordance with all applicable laws and standards. Thus, nearly any violation of federal lending laws can leave a lender susceptible to FCA lawsuits for federally insured loans.

Worse, FHA has become increasingly aggressive in bringing such claims, which had traditionally been used only in some of the more egregious situations. Now, as a result of certain court decisions, the government has even more latitude in pursuing FCA and related claims against lenders.

At the end, this simply means that compliance must play an integral role in the origination process. If it does not, the ramifications can be far worse than they have been in the past.