Mortgage company Academy Mortgage Corporation (Academy), based in Draper, Utah, has agreed to pay $38.5 million to resolve allegations it violated the False Claims Act by improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA).
The settlement announced today resolves a lawsuit filed and litigated by former Academy underwriter Gwen Thrower (Thrower) against Academy under the qui tam or whistleblower provisions of the False Claims Act, which permit a private party (known as a relator) to file a lawsuit on behalf of the United States and receive a portion of any recovery.
In her lawsuit filed in the Northern District of California, Thrower alleged that from January 2008 through April 2017, Academy had an underwriting process that led employees to disregard FHA rules and falsely certify compliance with underwriting requirements. Thrower further alleged that, as a result of Academy’s knowingly deficient mortgage underwriting practices, the government paid insurance claims on loans improperly underwritten by Academy.
“Lenders that knowingly cause the government to guarantee loans that are materially deficient put both homeowners and the public fisc at risk,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The settlement announced today is a result of the relator’s efforts to develop this case in litigation and complements the department’s actions to prevent abuse of government programs designed to foster home ownership.”
Under the terms of the settlement, Academy will pay $38,500,000 to the United States. Thrower will receive $11,511,500 as her share of the settlement proceeds.
The case is captioned United States of America ex rel. Gwen Thrower v. Academy Mortgage Corporation, No. 3:16-cv-2120-EMC, and was monitored by the U.S. Attorney’s Office for the Northern District of California and the Civil Division’s Commercial Litigation Branch.
The department has recovered billions of dollars under the False Claims Act from other lenders accused of knowingly violating FHA underwriting requirements.
The claims resolved by the settlement are allegations only and there has been no determination of liability.