A whopping $113 million will be paid by the New Jersey-based Freedom Mortgage Corp., the private lender company which settled with the U.S. Justice Department last Friday. According to an announcement from the U.S. agency, Freedom Mortgage admitted to the alleged violations made against the standards of the False Claims Act.
Reuters reported that Freedom Mortgage settled with the Justice Department to avoid the hassles of court including the cost and prolonged litigation. But of course, avoiding the court definitely costs which amounted to at least $100 million.
According to the publication, the company admitted to several violations, including that it knowingly insured risky mortgages against the standards of the False Claims Act and further produced substantial losses.
Furthermore, the company also admitted to forcibly not submitting reports on problems in the loans it uncovered in quality control reviews. This is a problem with the agency because there had been a defect rate that exceeded 30% in 2008 to 2010.
The case is also part of the many that the Justice Department had been covering including that of the Wells Fargo Co. "It is imperative that mortgage lenders that participate in the FHA insurance program follow the rules and requirements set forth by HUD," Principal Deputy Assistant Attorney General Benjamin C. Mizer, Head of the Justice Department's Civil Division said, as per MReport.
He added, "We will continue to work with our partners at HUD, its Office of Inspector General, and U.S. Attorneys around the country to protect homeowners and taxpayers from those who knowingly seek to abuse the FHA program for their own gain."
The publication further revealed that the company, in failing to comply with the Federal Housing Administration rules would further endanger the involved people including risking unsolicited losses. "Freedom Mortgage did not properly comply with FHA rules for the mortgages it was generating and did not adequately monitor early payment defaults. It also failed to report to HUD the defaults it did discover, as required by its participation in the program. Today's settlement recognizes those failures and imposes an appropriate sanction," U.S. Attorney Paul J. Fishman for the District of New Jersey said, as per the news agency.
The news outlet revealed further that the private lender have certified loans not eligible for the FHA mortgage insurance since Jan. 2006 until Dec. 2011. Not only that, even after identifying hundreds of loans that "possibly should have been self-reported to HUD," the lender only reported one, the publication reveals.
