Thomas & Solomon Represents Whistleblower in $14.5 Million Mortgage Fraud Settlement

On December 12, 2018, the United States Department of Justice (“DOJ”) announced that it reached a $14.5 million settlement with Finance of America (“FAM”) to resolve a lawsuit alleging Federal Housing Administration (“FHA”) mortgage fraud. The case was filed by Thomas & Solomon attorneys Patrick Solomon and Jonathan Ferris under the qui tam provision of the False Claims Act on behalf of Debra McGeehan—a former quality control underwriter at Gateway Funding (now acquired by FAM). She will receive nearly $2.4 million of the DOJ’s settlement as a reward for alerting the government of FHA mortgage fraud.

$14.5 Million Settlement

In this case, Thomas & Solomon filed a complaint on behalf of Ms. McGeehan alleging that Gateway misrepresented its compliance with HUD’s quality control guidelines. Specifically, Gateway was a direct endorsement lender eligible to participate in FHA’s loan program by agreeing to abide by HUD guidelines, but nevertheless approved FHA mortgage loans containing material deficiencies in violation of these guidelines. This resulted in FHA loans being underwritten, approved, and insured by the government that were otherwise ineligible for FHA insurance. Gateway’s conduct ultimately resulted in approximately $7.2 million worth of losses to the government, who ultimately bears the risk on FHA loans.

Patrick Solomon stated that “today’s settlement is proof that individuals like Debra can make a difference in stopping this fraud. For her, it was never about the whistleblower award, it was just about doing the right thing and trying to get things to change. It is very unfortunate that lenders continue to abuse the FHA mortgage program in underwriting loans that do not qualify for FHA insurance.”

False Claims Act

The False Claims Act contains a “qui tam” provision, which allows a normal citizen (called the “relator”) to bring a lawsuit against a party engaging in fraud against the United States. A case brought under this provision is filed “under seal,” meaning that the filing of a lawsuit is not public knowledge and remains confidential while the DOJ investigates the case. The relator may ultimately share in a percentage of the proceeds obtained by the government in settling or litigating the case.

Thomas & Solomon represents whistleblowers in the mortgage industry. Contact us for a confidential evaluation of your situation.

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