The United States Attorney in New Jersey announced today that Freedom Mortgage Corp., located in Mt. Laurel, N.J., has agreed to pay $113 million to resolve allegations that it violated the False Claims Act f by originating and underwriting single family mortgage loans insured by the Federal Housing Administration (FHA) that did not comply with certain FHA origination, underwriting and quality control requirements.
The United States alleged, among other things, that Freedom Mortgage did not always perform timely QC reviews or perform audits of all past due loans, as required by HUD. The QC reviews that Freedom Mortgage did perform revealed high defect rates, exceeding 30% between 2008 and 2010. Yet, between 2006 and 2011, Freedom Mortgage did not report a single improperly originated loan to HUD, despite its obligation to do so. In 2012, after identifying hundreds of potentially reportable loans, it reported only one.
Freedom is far from the first lending institution to settle charges relating to FHA lending violations. Others include Wells Fargo, which paid $1.2 billion in February 2016, and Franklin American, which settled with the government for $70 million in December 2015.