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The Trump Administration Appears Primed to Aggressively Enforce the False Claims Act and to Target Lending Institutions

On Behalf of | Sep 5, 2017 | False Claims Act |

Even though President Trump and his Administration have not made any official pronouncements regarding enforcement of the False Claims Act (“FCA”), it would appear that the current U.S. Department of Justice will not be a taking a less aggressive approach to its handling of FCA cases than it previously did under the Obama Administration. In fact, both U.S. Attorney General Jeff Sessions and Deputy Attorney General Rod Rosenstein testified in connection with their confirmations that they believed the FCA was a useful tool in combating government fraud. Attorney General Sessions testified in a January 10, 2017 Senate Judiciary Committee Hearing that, “if I am confirmed, I will make it a high priority of the department to root out and prosecute fraud in federal programs and to recover any monies lost due to fraud or false claims.” Similarly, Deputy Attorney General Rosenstein affirmed under oath during a March 7, 2017 Senate Judiciary Committee Hearing that he would vigorously enforce the FCA to recover taxpayer dollars.

Moreover, the DOJ’s actions since Attorney General Sessions was confirmed may indicate that it is placing higher scrutiny on mortgage companies’ practices than on its other FCA litigation and investigations. For instance, on May 16, 2017, the DOJ announced that Financial Freedom, a reverse mortgage originator and underwriter, had agreed to pay $89 million to resolve claims that it tried to obtain interest payments from the Federal Housing Administration (“FHA”), which the company was not entitled to receive because it did not comply with deadlines to appraise properties, failed to submit claims, and failed to pursue foreclosure proceedings. Additionally, the DOJ has not given any indication that it will do anything other than continue to aggressively litigate its lawsuit (filed in 2015) against Quicken Loans, and pursue its claims that Quicken Loans ignored underwriting red flags, pushed appraisers to boost appraisal numbers and ignored government mortgage guidelines.

On June 8, 2017, the Mortgage Bankers Association sent a letter to Attorney General Sessions and Secretary of Housing and Urban Development Ben Carson, stating, “On behalf of the Mortgage Bankers Association representing the housing finance industry and the consumers we serve, we respectfully urge you to suspend the Department of Justice’s current practice of bringing claims under the False Claims Act against mortgage lenders who participate in the Federal Housing Administration’s (FHA) Mortgage Insurance Programs.” Also, the MBA and four other trade associations sent Attorney General Sessions a June 30, 2017 letter requested a meeting with him to discuss the DOJ’s approach to enforcement of fair lending laws “regarding the consideration of race,” explaining that, “in a fair lending matter pending in the Northern District of Illinois, the Department recently espoused a concerning position of the previous Administration, which the Court then adopted.”

It is unclear whether Attorney General Sessions has granted the MBA and other trade associations’ requests to meet. Only time will tell whether the mortgage industry’s lobbying efforts will affect Attorney General Sessions’ and Deputy Attorney General Rosenstein’s stated commitments to strongly enforcing the FCA with regard to lending institutions’ practices.

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