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Taylor Bean, Home America Mortgage Settle $320 Million FCA Suit

usfinancepost.com | January 9, 2014

By Christine Layton

Taylor Bean & Whitaker Mortgage Corp. and Home America Mortgage Inc. have agreed to pay over $320 million to settle a False Claims Act whistleblower lawsuit alleging they falsified mortgage applications to secure federally funded insurance for loans that ultimately defaulted, the plaintiffs’ attorneys announced on Monday.

The complaint was filed in 2006 by former Home America Vice President of Operations Stephanie Kennedy and Comfort Friddle, a former loan officer for Home America, who said ex-Home America CEO James Hicks and his loan officers tricked the government into insuring bad loans through fake data, and then sold the loans to Taylor Bean to continue the scam.

Three months ago, Hicks and Carl Wright, the disbarred lawyer who handled many of the federally insured loans, said the lawsuit should be dismissed because they did not deal directly with the federal government.

The two women who brought the case to light observed the illegal practices firsthand, often witnessing falsification of assets, employment, income, and credit scores. When they attempted to stop the fraud from the inside, Hicks fired them both.

“When companies like TBW and Home America commit fraud, everyone suffers,” said Comfort Friddle. “It’s tempting to bury your head in the sand and pretend that you don’t see what’s happening, but if you don’t speak up, everyone is harmed.”

Hicks, Home America, Taylor Bean, and other principals disregarded Federal Housing Administration and HUD regulations to falsify data about borrowers’ eligibility for loan programs and their ability to repay. When the loans defaulted, government insurance had to pay. The defendants ultimately pushed off hundreds of millions of dollars in bad loans onto the government, according to the lawsuit.

The defendants also presented fake claims for repayment and defrauded their own customers by asserting fake warranties and inspections on their properties.

From the initial filing in 2006, the two worked to help various agencies with their investigations. In 2010, Taylor Bean owner Lee Farkas was convicted of mortgage fraud and is now serving a 30-year sentence.

“When we filed this case in 2006, the mortgage crisis was barely a speck on the horizon, and the FCA cases against mortgage companies were virtually unheard of,” said Julie Bracker, one of the whistleblower attorneys in the case. “But we were engaging in one of the most blatant examples of fraud we have ever seen, and we knew it had to be reported.”

“They ignored guidelines,” Friddle said. “I had even seen a couple of the girls making up documentation at a copier. And whiting out stuff and making copies and putting it in the file, which is insane.” She said she witnessed 21-year-old bank tellers, claiming they made $30,000 per month, qualify for loans.

Federal and state False Claims Acts allow private citizens with insider knowledge of abuse, fraud, or waste to bring an action on behalf of the government and participate in the recovery of stolen funds. Governments are allowed under the statutes to recover three times the amount defrauded, along with civil penalties of $5,500 to $11,000 per false claim. Successful whistleblowers are entitled to 15 to 30% of the governments’ recovery.

Taylor Bean was once the third-largest director endorsement lender of FHA loans in the country, with a portfolio of $80 billion servicing 488,000 mortgages. The company sought bankruptcy protection in 2009 after federal agents raided its Florida headquarters. Prosecutors discovered fraud that prompted lengthy prison sentences. Shortly after, Home America filed for Chapter 11 bankruptcy.

 

Back to January 2014 Archive

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