Reuters logo
Texas mortgage companies, founder must pay $93 million in fraud case -jury
December 1, 2016 / 1:50 PM / in a year

Texas mortgage companies, founder must pay $93 million in fraud case -jury

NEW YORK, Dec 1 (Reuters) - A federal jury has ordered two Texas-based home mortgage entities and their chief executive to pay nearly $93 million for defrauding the U.S. government into insuring thousands of risky loans, authorities said on Wednesday.

Americus Mortgage Corp, AllQuest Home Mortgage Corp, and their founder, Jim Hodge, were found liable on Tuesday by a Houston federal jury for violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act.

The jury awarded nearly $93 million in damages, including $7.37 million against Hodge, a sum that is subject to mandatory tripling. Further penalties are expected, which U.S. District Judge George Hanks will set at a later date.

A lawyer for the companies, which during the period at issue were known as Allied Home Mortgage Capital Corp, Allied Home Mortgage Corp, did not immediately respond to a request for comment on Thursday.

The lawsuit was one of several brought by Manhattan U.S. Attorney Preet Bharara’s office in the wake of the 2008 financial crisis against lenders who underwrote loans insured by the Federal Housing Administration’s Direct Endorsement Program.

The lawsuit was announced in 2011, when Bharara’s office intervened in a pending whistleblower case. It was transferred from New York to Texas in 2012.

The government contended that Allied Home Mortgage Capital Corp operated over 100 “shadow” branch offices that originated FHA-insured mortgage loans without approval from the U.S. Department of Housing and Urban Development.

The government said that those undisclosed branches were not subject to HUD oversight and that their mortgage default rates were disguised as the loans were submitted using the ID numbers of approved branches.

Allied Home Mortgage Corp also recklessly underwrote and certified at least 1,192 loans that were ineligible for insurance under HUD’s guidelines, resulting in $85.6 million in losses when the mortgages defaulted, the government said.

Bharara, in announcing the verdict, said the jury “held Mr. Hodge and Allied responsible for their lies and has made them pay for losses the United States suffered on loans that would never have been insured by HUD absent their lies.” (Reporting by Nate Raymond in New York; Editing by Bernadette Baum)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below