Feds Join Allied Home Mortgage Whistleblower Lawsuit
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Feds Join Allied Home Mortgage Whistleblower Lawsuit

By Matt O'Donnell


Allied Home Mortgage
(LEGAFI) -- The federal government has joined a qui tam whistleblower lawsuit against Allied Home Mortgage -- one of the nation's top privately held mortgage lenders -- for alleged lending fraud that cost the government hundreds of millions of dollars and forced thousands of American homeowners into foreclosure.

According to a government press release, more than one-third of the 112,324 home loans originated by Allied between 2001 and the end of 2010 have defaulted, resulting in more than $834 million in insurance claims paid by HUD. The default rate climbed to “a staggering 55%” in 2006 and 2007, at the height of the housing boom – exponentially larger than the industry standard for loans written just before the real estate market bust. 

The U.S. joins a whistleblower lawsuit filed against Allied Mortgage earlier this year that accuses the company of profiting for years as one of the nation’s largest FHA lenders by operating hundreds of unapproved “shadow” branches. The FHA had no idea the offices existed, allowing Allied Mortgage to originate hundreds of unapproved loans that did not meet government standards. Allied, at the direction of CEO Jim Hodge, hid the source of the loans originated by these shadow branches by making it appear they came from approved branches, the government claims. 

"Allied operated with impunity for many years due a culture of corruption created by Hodge, who eliminated the position of chief financial officer and other senior management positions, intimidated employees by spontaneous terminations and aggressive e-mail monitoring, and silenced former employees by actual and threatened litigation against them," the Allied Home Mortgage lawsuit says. "As a result, Allied was able to conceal its dysfunctional operations and maintain its profitable position in the mortgage industry."

The Allied Home Mortgage lending fraud lawsuit is seeking treble damages and penalties under the False Claims Act for the hundreds of millions of dollars in insurance claims already by the government for mortgages originated by Allied, as well as compensatory damages under common law for the hundreds of millions of dollars in insurance claims that the government expects to pay in the future.

If a settlement is reached, the Allied Home Mortgage whistleblowers stand to receive 15% to 30% of any recovered funds. 

The case is U.S. v. Allied Home Mortgage Corp., Case No. 11-cv-5443, U.S. District court, Southern District of New York (Manhattan).


Updated November 7th, 2010

All updates are located in the Qui Tam Whistleblower section of Legafi. 


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