Movement Mortgage agreed to a $23.75 million settlement with the Justice Department over allegations that the company violated the False Claims Act by failing to comply with underwriting requirements for government-guaranteed loans.
The qui tam case was initially brought in 2018 by two whistleblowers, Jennifer McNeil and Ledell Javon Wilson, who will share in an award of over $4 million from the settlement. Both are former Movement employees.
Some of this information was obtained from their attorney, Thomas & Solomon; even though the settlement has been publicized, a check of the PACER docket page on June 30 still showed the plaintiffs’ and defendants’ names as being sealed.
“Too often individuals, and especially underwriters and quality control employees, feel powerless in the mortgage industry where there is typically an expectation that fraud will occur,” said Nelson Thomas, founding partner of Thomas & Solomon in its press release. “Today’s settlement is proof that individuals like Jennifer and Javon can make a difference in stopping this fraud. For each of them, it was never about the whistleblower award, it was just about doing the right thing and trying to get things to change.”
Both Federal Housing Administration-insured and Veterans Affairs-guaranteed mortgage applications submitted by Movement, headquartered in Indian Land, South Carolina, were alleged to have not met either program’s requirements, a press release from the U.S. Attorney for the Northern District of New York in Albany said.
The original complaint filed by McNeil and Wilson alleged “In practice, Movement Mortgage’s inexperienced underwriting staff routinely made basic errors related to properly calculating the income, debts and assets for borrowers.”
Movement admitted for the purposes of the settlement that it “engaged in certain conduct” with the origination, underwriting and quality control practices for FHA and VA loans produced between 2008 — the year the company was founded as New American Mortgage — and 2018, the agreement stated. The loans involved ended up with the government agencies paying claims following default.
The U.S. Attorney’s office noted that included a period of rapid expansion; at the time of the 2013 rebrand, Movement had 170 locations and nearly 900 employees compared with two offices and 12 employees in 2008.
“Lenders participating in mortgage programs backed by taxpayers must follow rules designed to protect both program integrity and homeowners,” said Carla Freedman, U.S. Attorney for the Northern District of New York, in a press release. “Today’s settlement holds Movement Mortgage accountable for its past violations, while acknowledging that it has taken steps to strengthen its internal controls to ensure future compliance with FHA and VA requirements.”
The loans involved in this case made up less than 0.5% of the total federal mortgages originated during the time frame, a statement from Movement said.
“Movement Mortgage has a mission unlike anyone in the mortgage industry — to serve others, particularly the underserved, minorities, and low-income families, and our federal loan programs are extremely important to our homebuyers and to us,” the statement said. “The U.S. Attorney noted that we ‘took significant measures to stop the practices, both before and after being notified of the United States’ investigation,’ and that the settlement is ‘not an admission of any legal liability.’ That last statement is in Attachment A, which provides the case numbers for the 339 FHA and 270 VA mortgages covered.
“We believe we have addressed these problems and agreed to the settlement so we can move on and continue to focus on our mission,” the Movement statement said.
In the U.S. Attorney press release, Damon Smith, general counsel for the Department of Housing and Urban Development is quoted as saying “Through this settlement, Movement Mortgage is accepting responsibility for its past actions by fully repaying the FHA insurance fund for its losses on defaulted loans that should not have been issued.”
Ironically, in 2019, Movement purchased Lennar’s retail mortgage branches (which did business as Eagle Home Loans) months after the homebuilder settled its own False Claims case.
This does not end Movement’s legal issues. Earlier this month, the company was sued by loanDepot in a federal court over allegations of loan officer poaching.
A little over a year ago, Movement Mortgage agreed to resolve racial discrimination and disparate treatment claims, giving $75,000 to organizations working toward equitable housing solutions.
Enforcement of the False Claims Act, a law which dates back to the Civil War, became a tool against mortgage lenders, both bank and non-bank, following the Financial Crisis. It has been cited as one of the primary reasons depositories have pulled out of government-insured lending.
In federal fiscal year 2014, FHA-related enforcement resulted in $3.1 billion in penalties. For fiscal year 2019, settlements slipped to $32.6 million, the vast majority of that from the Quicken Loans (now Rocket Mortgage) case, where the Detroit-based lender openly challenged the government, which was seeking a much larger penalty.
The most recent settlements include Academy Mortgage, which agreed to a $38.5 million payment in December 2022, and Guild Mortgage, whose $24.9 million agreement without admitting or denying liability in October 2020, was just prior to its initial public offering.
Meanwhile, a False Claims Act case against now-defunct Nutter Home Loans regarding a reverse mortgage business it exited prior to its closure, is scheduled to go to trial on April 29, 2024, according to a check of the docket sheet.
