Federal court unseals rare False Claims Act complaint against home mortgage servicer

by Saul Ewing Arnstein & Lehr LLP
Contact

In Brief

  • The complaint claims lender OneWest falsely certified that it made required disclosures to homeowners, leading the federal government to pay more than $200 million in false claims.
  • OneWest acquired its loan portfolio from the failed IndyMac Bank, which collapsed amid the financial crisis in 2008.

The U.S. District Court for the Southern District of New York recently unsealed a complaint filed against lender OneWest Bank FSB (“OneWest”) by a whistleblower, marking a rare False Claims Act (“FCA”) case brought in the financial services sector.

The complaint in United States ex rel Fisher v. OneWest Bank FSB, No. 12-09352 (S.D.N.Y.) alleges that OneWest repeatedly falsely certified that it would, or did make, required disclosures to consumers in connection with its participation in the Home Affordable Modification Program (“HAMP”). The complaint alleges that OneWest’s resulting fraudulent claims caused the government to pay more than $200 million.

OneWest got its start in 2009 with its acquisition from the Federal Deposit Insurance Corporation (“FDIC”) of IndyMac Bank FSB (“IndyMac”). IndyMac was seized by the FDIC in July 2008 after it failed due to its enormous portfolio of underperforming mortgages. IndyMac’s assets – approximately $32 billion – made it one of the largest bank failures in U.S. history.

After acquiring IndyMac, OneWest agreed in September 2010 to participate as a servicer for HAMP, a role it continues today. HAMP was instituted by the Obama administration in 2009, with the goal of preventing struggling borrowers from defaulting on their home mortgages. Under the program, servicers and other parties involved in loans secured by homes receive financial incentives from the government in return for modifying the terms of the loans to keep borrowers out of default. Like other HAMP servicers, OneWest agreed that it would make all required disclosures to borrowers under laws such as the Truth in Lending Act (“TILA”), and it periodically certified that it had in fact made these disclosures.

The complaint alleges that OneWest “typically failed to disclose anywhere in the modification agreements” various terms such as the finance charge, the annual percentage rate, or the total amount of payments. Further, it claims OneWest “virtually always” added new debt to the borrower’s balance, averaging about $17,000 per contract. This was allegedly done without any itemizations or disclosures that would have revealed the actions taken. By modifying loans without making the necessary TILA disclosures, while at the same time certifying that it had made these disclosures and accepting government incentives, OneWest allegedly made false claims under the FCA that caused the government to pay out over $206 million. Of this total, more than $58 million went directly to OneWest as the servicer for the loans.

The qui tam complaint was brought by Michael J. Fisher, a former employee of two law firms in California and Texas whose clients sought loan modifications from OneWest and other servicers. The case was unsealed after the federal government declined its option under the FCA to intervene in the action.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Saul Ewing Arnstein & Lehr LLP | Attorney Advertising

Written by:

Saul Ewing Arnstein & Lehr LLP
Contact
more
less

Saul Ewing Arnstein & Lehr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.