California mortgage lender agrees to pay over $1 million to resolve fraud allegations | USAO-EDWA


Spokane, Wash. – Vanessa R. Waldref, United States Attorney for the Eastern District of Washington, announced today that American Financial Network, Inc., a Brea, Calif.-based mortgage lender, has agreed to pay 1 $037,145 to resolve allegations that he and government-backed mortgages were fraudulently insured by the Federal Housing Administration (FHA), a component of the U.S. Department of Housing and Urban Development (HUD).

“FHA-backed mortgages are an essential resource for first-time home buyers, moderate-income borrowers, and families who have experienced negative credit due to the pandemic or other events beyond their control” , said U.S. Attorney Waldref. “By inappropriately creating ineligible mortgages, lenders are taking advantage of limited FHA program resources and unfairly passing on the risk of loss to the public.”

Since at least December 2011, the AFN has participated in the FHA Direct Approval Program. Through this program, a lender such as AFN is permitted to offer and approve mortgages to be FHA insured without prior FHA review or approval. Lenders such as AFN are responsible for carefully underwriting the mortgage to ensure it meets all FHA requirements. After a mortgage loan is FHA insured, if the borrower defaults or is unable to repay the mortgage, the lender who holds the mortgage note can submit a claim for insurance benefits to the FHA to cover its losses.

The settlement resolves allegations that between December 2011 and March 2019, the AFN knowingly underwrote certain FHA mortgages and approved for insurance certain mortgages that did not meet FHA requirements or qualify for insurance. insurance, causing losses to the United States when borrowers defaulted on those mortgages. The settlement further resolves allegations that the AFN knowingly failed to perform the quality control reviews it was required to perform.

This case began in March 2019 when a whistleblower, a former AFN loan officer, filed a sealed qui tam complaint in federal court in Spokane. When a whistleblower, or “reporter,” files a qui tam complaint, the False Claims Act requires the United States to investigate the allegations and choose whether to step in and resume action or decline to report. intervene and allow the parent to proceed with the litigation on behalf of the United States. The parent is usually able to participate in any recovery afterwards. Pursuant to the settlement agreement, the parent in this case will receive $228,172 from the settlement and will also recover their attorney’s fees, expenses and costs.

“Quality, affordable housing is a critical issue in eastern Washington and across the country,” U.S. Attorney Waldref said. “Protecting the resources that support families dreaming of buying their first home makes our community stronger. I commend the outstanding investigative work of the Office of Veterans Affairs Inspector General and HUD’s Office of Inspector General in holding accountable those who abuse housing programs.

“HUD’s Office of Inspector General is committed to working with the Department of Justice and our law enforcement partners to ensure that federal programs designed to help our nation’s most vulnerable are not abused,” Special Agent in Charge Scott Tanchak said. “Today’s settlement demonstrates the government’s commitment to protecting the integrity of HUD’s programs.”

“Investigations like these help preserve the integrity of the home loan approval process and protect vulnerable veterans from fraudulent lending practices,” said Special Agent in Charge Jason Root of the field office of the northwest of the Department of Veterans Affairs Inspector General. “The VA OIG thanks the U.S. Attorney’s Office for the Eastern District of Washington and the HUD Inspector General’s Office for their partnership in this joint investigation.”

The settlement was the result of a joint investigation by the U.S. Attorney’s Office for the Eastern District of Washington, HUD’s Office of Inspector General, and the U.S. Department of Veterans Affairs, Office of Inspector General, Resident Office of Spokane.

Assistant United States Attorneys Tyler HL Tornabene and Dan Fruchter and United States Special Assistant Counsel Frieda K. Zimmerman handled this matter on behalf of the United States. The claims resolved by the settlement are allegations only and no liability has been determined.


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