by Brian Mahany
Fannie Mae says it needs more tax dollars – $7.8 billion more – after continuing to suffer losses in the housing market. Fannie Mae is government sponsored enterprise that insures lenders against default. It’s mission is to strengthen the housing and mortgage markets and support affordable home ownership. Without Fannie Mae backing, most banks would be far more reluctant to lend money. In theory, Fannie Mae (short for the Federal National Mortgage Association) is funded by premiums it collects. It has been on government life support, however, ever since the housing bubble burst in 2007.
With government tax dollars on the line, taxpayers ultimately foot the bill. Congress can let the mortgages default but many worry that would simply exasperate the housing crisis. If banks can’t free up capital to make loans, new funds don’t flow into the market.
Recently our firm filed a federal false claim action on behalf of taxpayers against Allied Home Mortgage Corporation. Allied is reportedly the fifth largest FHA lender in the U.S. and the largest privately held lender. On November 1st, HUD and the U.S. Attorney intervened in our suit and are now claiming $2.5 billion in damages.
While no mortgage lender alone is responsible for the current housing crisis, many contributed to the meltdown by engaging in predatory lending and intentionally or negligently writing bad loans. Until 2007, it wasn’t uncommon for some unscrupulous loan officers to simply turn a blind eye to lack of employment verification. Worse, some loan officers actively helped borrowers with straw buyers, inflated appraisals and pushing home buyers to borrow more than they could afford.
Many of the smaller players are out of business. Although legally responsible for the mess they created, collection would be difficult. Other companies like Deutsche Bank (facing a $1 billion dollar government lawsuit) and Allied are still around and should be forced to pay for any mistakes or fraud they may have committed.
In all these cases, there is a role for whistle blowers. Under the federal false claims act, people coming forward and providing assistance may be entitled to a portion of the recovery. If tax dollars are on the line, a false claims act case may be appropriate.
Earlier this week the Mortgage News Daily noted, “Mortgage companies should pay attention to the Allied lawsuit.” They should. We are actively seeking other individuals – auditors, former loan officers and others – that have evidence of fraud in any federally funded, backed or insured program.
With tens of billions of losses, the potential rewards for whistleblowers are in the hundreds of millions of dollars.
If you know of mortgage fraud, medicare fraud or other similar conduct that hurts taxpayers, give us a call. Our fraud recovery lawyers are interested in representing you in a false claims action. For a confidential consultation, contact attorney Brian Mahany* at (414)704-6731 (direct) or by email at
* Brian serves on the Board of Advisors for the International Association of Asset Recovery
Mahany & Ertl, LLC – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services available in most jurisdictions.