The government has used the False Claims Act to accuse lenders of knowingly originating and underwriting mortgages that weren’t up to FHA
standards. Those accusations have led the government to secure huge settlements from lenders like Wells Fargo ($1.2 billion), Freedom Mortgage ($113 million) and PHH ($75 million), according to a HousingWire report.
Carson, speaking at a House Financial Services Committee hearing Thursday, said that the government’s frequent use of the act was “ridiculous.”
Carson was responding to questioning by Rep. Dave Trott (R-Mich.), who maintained that the government’s use of the False Claims Act was causing lenders to avoid FHA lending and driving up mortgage costs for borrowers, HousingWire reported. Trott asked Carson if HUD and the FHA had any plans to address overuse of the act.
“We are already addressing that problem – our staff, along with the (Department of Justice) staff,” Carson said. “And we’re committed to getting that resolved, because it’s ridiculous, quite frankly.”
Carson said he was “not exactly sure” why use of the False Claims Act had escalated in recent years, “but the long-term effects of that escalation is obviously providing fewer appropriate choices for consumers – and that’s exactly the opposite of what we should be doing.”
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In recent years, the federal government has used the False Claims Act to wring huge settlements out of mortgage lenders who originated mortgages that didn’t meet Federal Housing Administration Standards. But that proclivity may be a thing of the past, according to Department of Housing and Urban Development Secretary Ben Carson.