Kim Gale  |  December 15, 2017

Category: Consumer News

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whistleblower qui tam lawsuit housing loans home loansIberiabank has settled a qui tam lawsuit for $11.6 million, resolving allegations the company had committed violations of the False Claims Act.

Iberiabank was accused of failing to comply with federal laws in order to obtain insurance on mortgage loans from the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development.

“Mortgage lenders must follow FHA program rules designed to avoid putting federal funds at risk and increasing the chances that borrowers may lose their homes,” said Principal Deputy Assistant Attorney General Chad A. Readler in a DOJ press release. “The Department will continue to hold accountable lenders that knowingly violate material program requirements that cause the government to guarantee ineligible loans.”

According to the allegations, Iberiabank acted as a Direct Endorsement (DE) lender in the FHA insurance program. As a DE lender, Iberiabank had the authority to originate, underwrite and endorse mortgages for FHA insurance.

A DE-lender-approved mortgage loan that later goes into default has an option for the holder of the loan to submit an insurance claim to HUD for the losses incurred by the defaulted loan. The DE lender is trusted to have maintained tight quality control, which means the FHA doesn’t review a loan for compliance with FHA requirements before it is covered by FHA insurance if a DE lender has approved it.

The qui tam lawsuit says the FHA prohibits any type of commission to be offered to lender underwriting staff to avoid improper incentives that could lead staff to approve less than stellar loan applications. DE lenders certify that they will comply with all FHA requirements.

Qui Tam Lawsuit Allegations Against Iberiabank

From Jan. 1, 2005 through Dec. 31, 2014, Iberiabank allegedly certified loans for FHA insurance that did not meet HUD underwriting and origination requirements. As such, these loans were not eligible for FHA mortgage insurance.

According to the qui tam lawsuit, Iberiabank’s loan files were incomplete and in disarray. Information regarding verification of the borrower’s income was missing, appraisal discrepancies of home values in the relevant neighborhood were unresolved, and documentation regarding the borrower’s down payment was sketchy.

In 2010, HUD notified Iberiabank that the financial institution was in violation of HUD requirements because the company was paying underwriter commissions. Even though the bank said it would stop paying commissions, Iberiabank allegedly was paying incentive payments to its underwriters through 2014.

The qui tam lawsuit says that as a result of Iberiabank’s misconduct, HUD insured loans that really were not eligible for FHA mortgage insurance. As a result, HUD lost money when it had to pay insurance claims on the ill-conceived loans.

“It is troubling when financial institutions, who have fiduciary responsibilities and are expected to conduct themselves as honest brokers, wrongfully exploit federally funded programs,” said Jeremy Kirkland of HUD’s Office of Inspector General.  “This settlement demonstrates HUD OIG’s commitment to work with our partners, under the False Claims Act, to combat fraud against the Government.  Today’s settlement should serve as a cautionary tale that we will continue to aggressively utilize it in pursuit of those that seek to undermine federal housing programs.”

The qui tam lawsuit was filed under the False Claims Act by two former Iberiabank employees, both of whom worked out of an Iberiabank office in Arkansas. As whistleblowers who sued on behalf of the U.S. government, the two women will receive 20 percent of the recovery, according to the False Claims Act.

The Iberiabank Qui Tam Lawsuit is Case No 4:15-cv-416 in the U.S. District Court for the Eastern District of Arkansas.

In general, whistleblower and qui tam lawsuits are filed individually by each plaintiff and are not class actions. Whistleblowers can only join this investigation if they are reporting fraud against the government, meaning that the government must be the victim, and that the alleged fraud should be a substantial loss of money.

Do YOU have a legal claim? Fill out the form on this page now for a free, immediate, and confidential case evaluation. The attorneys who work with Top Class Actions will contact you if you qualify to let you know if an individual qui tam lawsuit or whistleblower class action lawsuit is best for you. Hurry — statutes of limitations may apply.

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Join a Free Whistleblower, Qui Tam Lawsuit Investigation

If you believe that you have witnessed fraud committed against the government, you may have a legal claim. Whistleblowers can only join this investigation if they are reporting fraud against the government, meaning that the government must be the victim, and that the alleged fraud should be a substantial loss of money.

See if you qualify to pursue compensation and join a whistleblower lawsuit investigation by submitting your information for a free case evaluation.

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