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Editor: Mike Bothwell
Profession: Qui Tam Attorney

Category: Settlements and Verdicts

Direct Endorsement lender National City Mortgage (NCM), based out of Miamisburg, Ohio, is paying the United States $4.6 million based upon the False Claims Act, to settle allegations relating to mortgage fraud. The settlement was announced by PRNewswire on May 22, 2008.

According to the government, NCM submitted 58 late endorsement loans for FHA insurance coverage in violation of FHA regulations. NCM is one of the lenders approved by HUD, which allows it to loan to borrowers utilizing FHA insurance coverage, even with lower or intermediate income. Such FHA insurance protects lenders against loss in the event a borrower defaults. Lenders like NCM make loans to borrowers that generally would not meet normal underwriting stipulations but are still credit conscious. Lenders are required to make particular certifications to the FHA when submitting loans more than 60 days from the loan closing for insurance coverage. These loan payments can not be more than 30 days past due when requesting FHA insurance coverage.

This settlement clearly sends a message to other lending institutions that if they knowingly submit loans that are not truly eligible for mortgage insurance, there will be consequences.