Whistleblowers reap millions in U.S. mortgage suits
(Reuters) - Troubled homeowners are not the only ones set to get a financial lift from the U.S. government's $25 billion landmark mortgage settlement.
Whistleblowers who were instrumental in revealing epidemic mortgage abuses, some of whom risked their careers to do so, are getting multi-million-dollar payouts, court documents show.
Victor Bibby and Brian Donnelly, two Georgia mortgage brokers, are among the handful of whistleblowers whose stories are coming into focus.
Bibby and Donnelly said they started noticing in 2005 that lenders were charging veterans hidden fees on mortgage refinancing - a violation of the government's Interest Rate Reduction Refinancing Loans program.
The pair, who worked for U.S. Financial Services Inc, a mortgage brokerage firm in Alpharetta, Georgia, said they became suspicious when lenders told them not to show an amount charged for attorneys fees on loan documents, but instead add the sum to the charge shown for "title examination fee."
After lenders ignored their concerns, Bibby and Donnelly hired an attorney and filed a whistleblower suit.
The suit remained under seal to give the government time to investigate. Bibby and Donnelly had to keep mum for more than five years and try to find ways to avoid charging the hidden fees.
"For both our families being hushed for such a long time and holding this inside was unbearable," Donnelly said in an interview. "It puts a lot of stress on you."
The wait paid off in the form of a $45 million government settlement with JPMorgan Chase & Co that became public this week. Bibby and Donnelly and their attorneys will receive 26 percent, or $11.7 million.
The case is one of five whistleblower suits settled for a total of $227 million as part of the broader $25 billion deal with five lenders over foreclosure abuses, according to court documents filed this week.
Details of the cases are emerging slowly as suits are unsealed and prosecutors disclose settlements.
The complaints were brought under a whistleblower provision in the U.S. False Claims Act, which allows private individuals with knowledge of wrongdoing to bring suits on behalf of the government and share in the proceeds of any settlement.
GOOD RETURN FOR TAXPAYERS TOO
Of the five settlements outlined in court documents this week, the largest was for $95 million.
U.S. Attorneys in North Carolina and South Carolina said on Monday that five banks - Bank of America Corp, JPMorgan Chase, Wells Fargo & Co, Citigroup Inc and Ally Financial - agreed to pay the amount to address allegations they participated in a nationwide practice of failing to obtain the required mortgage assignments, documents used to transfer ownership of loans.
The lenders also used false assignments to submit Federal Housing Administration insurance claims, prosecutors said.
The whistleblower in the case, Florida homeowner Lynn Szymoniak, will receive $18 million.
She gained national attention last year when CBS' "60 Minutes" profiled her role in uncovering the robo-signing of foreclosure documents by large lenders.
While trying to save her own home from foreclosure, according to the "60 Minutes" report, Szymoniak used her legal training to research other mortgages and discovered that a "Linda Green" had signed thousands of mortgage documents, in varying signature styles.
Multiple employees in a mortgage document "sweat shop" in Georgia were using the name Linda Green to recreate missing mortgage assignment documents for the banks, the report said.
Szymoniak declined to comment.
Bill Nettles, the U.S. Attorney in South Carolina, said the $95 million settlement sparked by Green's discovery also provided a strong return for taxpayers, considering the annual budget for his office is $10 million.
Prosecutors said the $95 million payment is only a partial settlement, indicating other banks could be under scrutiny. Nettles would neither confirm nor deny the existence of an ongoing investigation.
Two of the other settlements outlined this week - for $75 million and $6.5 million - appear to be related to an investigation into whether Bank of America and its Countrywide Financial unit knowingly made FHA-insured loans to unqualified borrowers.
Prosecutors in New York said in February they had reached a $1 billion settlement with the bank over these practices, but have not yet filed court documents.
Court documents have not been filed in the fifth case, which resulted in a $6.2 million settlement.
Legal releases in the $25 billion mortgage settlement indicated other whistleblower cases are still in the works.
"DEAD IN THIS INDUSTRY"
Bibby, one of the Georgia mortgage brokers, said it was difficult not knowing if the government would take up their case and watching the fraud continue.
A spokesman for JPMorgan declined to comment. In the mortgage settlement documents filed this week, the bank said it did not admit liability. Bibby and Donnelly are continuing to press their case against the other lenders, including Bank of America, Citigroup and Wells Fargo.
Bibby, who is 46 and married with three children, and Donnelly, who is 56 and married, said they don't have plans for their portion of the settlement. They will have to pay taxes and attorney fees out of the $11.7 million sum.
U.S. Financial Services at one time had about 50 employees, but is now basically out of business. They are not sure what they will do next.
"I think we're kind of dead in this industry, to say the least," Bibby added.
(Reporting By Rick Rothacker; editing by Andre Grenon)