Feds Eases Off False Claims Act for FHA Violations

Oct 29, 2019
HUD and the Justice Department announced a memorandum of understanding that eases their use of the False Claims Act for violations by Federal Housing Administration lenders.

Under the plan, the agencies will primarily enforce FHA requirements through HUD's administrative proceedings. The MOU also specifically addresses how the departments will consult with each other regarding use of the FCA in connection with defects on mortgage loans insured by FHA.

The plan, in addition to other HUD reforms, is designed to encourage banks to return to FHA lending. Many banks exited the program during the years following the financial crisis due to the federal government's aggressive use of the FCA to extract settlements. As a result, banks now originate less than 20 percent of all FHA loans.