A OneWest whistleblower lawsuit accuses the lender of mishandling applications for loan modifications, possibly costing many borrowers their homes.

The California mortgage lender, once headed by Treasury Secretary nominee Steven T. Mnuchin, is in the crosshairs of a False Claims Act claim initiated in 2014 by three former employees.

One of the whistleblowers is plaintiff Andrew M. Andrew used to work at OneWest, processing requests for home mortgage loan modifications.

Homeowners sometimes request modification of mortgage loan terms in an effort to avoid foreclosure. Modifications of loan terms were a particularly sensitive topic during the recent recession, when a lender’s responsiveness to a request for modification could mean the difference between a borrower keeping or losing their home.

Andrew says he had concerns about the way modification requests were being allegedly mishandled.

As one example, he says an incorrect use of a spreadsheet formula assumed that applicants would defer the maximum amount of their mortgage allowed by federal regulations.

That assumption would have resulted in many homeowners taking on more debt than they could handle, disqualifying them from the program, he claims. He says many people lost their homes unnecessarily because of the use of that formula.

Andrew says he repeatedly raised those concerns with his supervisors, but he could not get them to address the problems. He says that in January 2012 he raised those concerns with OneWest top executives, including Mnuchin himself.

He told the executives about a range of problems – from lack of training and staff, to technical problems that resulted in misclassification of loans, to bad formulas used in processing applications for modification.

Andrew says he worked one more month for OneWest. He was then allegedly hired by the bank as an outside consultant and asked to correct the problems he found.

But Andrew says OneWest never fixed the problems he pointed out. His OneWest whistleblower lawsuit says there is “no evidence to suggest that OneWest’s policies or procedures have been changed to address these very important issues.”

OneWest Whistleblower Lawsuit Invokes False Claims Act

Claims like this OneWest whistleblower lawsuit arise under the federal False Claims Act.

This law allows persons who have evidence of fraud committed against the federal government to initiate a whistleblower lawsuit against the alleged fraudster on the government’s behalf. If the claim is successful, the plaintiff will be awarded with a percentage of the amount of money recovered.

Once the complaint is filed, it is kept under seal while the Justice Department conducts an investigation and decides if it will intervene in the action.

The OneWest whistleblower lawsuit was originally filed under seal. The case was made public in March 2016, when the Justice Department made an initial decision not to intervene.

The whistleblowers then amended their pleadings and re-filed them in October. Those pleadings remain under seal to date while the Justice Department takes a second look at the allegations. The department is expected to make a decision by March on whether or not to intervene.