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Friday
Aug112017

Whistleblower collects $9 million in federal mortgage settlement

A former employee of a New Jersey mortgage company was awarded $9 million Tuesday when the company settled allegations that it violated standards for home loans backed by federal agencies.

Mary Bozzelli brought a lawsuit against PHH Mortgage Corporation and a Minnesota subsidiary under the whistleblower or qui tam provisions of the federal False Claims Act.

The False Claims Act allows private citizens to sue on behalf of the government and share in any recovery.

Bozzelli accused PHH of knowingly originating and underwriting mortgages that didn't meet the standards of several federal housing agencies.

The DOJ has the right to intervene in qui tam cases and take them over, which happened with Bozzeli's suit.

She was awarded $9 million as her share of the $74.5 million PHH paid the government to settle the case.

PHH didn't admit any liability.

Tuesday's settlement resolved allegations that PHH failed to comply with certain FHA, VA, Fannie Mae and Freddie Mac origination, underwriting, and quality control requirements.

William Fitzpatrick, acting U.S. Attorney for New Jersey, said: “This settlement requires PHH to pay back to the taxpayers of the United States millions of dollars in loans that never should have been made.”

Bozzelli worked for PHH from 1992 through mid 2011.

She alleged that PHH pressured employees to approve "more and more loans (for government programs) as quickly as possible."

The firm failed to document borrowers’ creditworthiness and their claimed equity in prior homes, the DOJ said.

PHH also didn't self-report material violations of FHA rules to the Department of Housing and Urban Development until 2013, according to the allegations.

The qui tam action was United States ex rel. Mary Bozzelli v. PHH Mortgage Corporation and PHH Corporation, 13-cv-3084 (E.D.N.Y.).

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Richard L. Cassin is the publisher and editor of the FCPA Blog.