Ever since the financial meltdown and the crash of real estate, the U.S. Department of Justice (DOJ) has been looking to bring big mortgage fraud cases, both civil and criminal, against banks and other lending institutions. Assistant Attorneys General Breuer of the Criminal Division and West of the Civil Division identified mortgage fraud as a top priority.
There have been lots of mortgage fraud prosecutions: a few big ones such as against the mortgage firm Taylor Bean & Whitaker, and lots of smaller ones against individuals and small companies such as in the Middle District of Florida's Mortgage Fraud Surge. But, I have not heard of a large civil fraud case against a big lender until now. This week the U.S. Attorney for the Southern District of New York filed an amended complaint against Allied Home Mortgage and two of its executives: US ex rel Belli v. Allied Home Mortgage Capital Corp. The government alleges that the defendants' fraudulent mortgage lending practices led to huge default rates and over $800 million in losses that the FHA, the government insurer of the loans, had to cover.
I bring the matter up here because the case against Allied started as a qui tam brought by an Allied branch manager from Massachusetts, Peter Belli, who filed the initial case under seal. See ProPublica article. The case involves claims pursuant to the False Claims Act and also provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (codified in Title 12 and 15 and better known as "FIRREA").
FIRREA contains a whistleblower provision, 12 U.S.C. §§ 4201-4212, though few people seem to know about it --which is understandable as it is hard to find and almost never cited. The Act was codified over two different statutory titles and almost all the cites I have seen to it reference only the public law citation and not the United States Code. I did find it . . . on another blog of course. The Whistleblower Qui Tam Law Blog has a short section explaining the provisions of the FIRREA whistleblower provisions and the rewards that relators can obtain under that Act.