August 21, 2013

Senator Warren Presses DOJ for Information Relating to Settlement of False Claims Submitted to FHA

Says Better Deal For Taxpayers Would Have Improved FHA's Troubled Financial Footing

Full Text of the Letter Available Here

WASHINGTON, DC - United States Senator Elizabeth Warren today sent a letter to Attorney General Eric Holder requesting additional information about the federal government's decision to settle false claims submitted to the Federal Housing Administration (FHA) by the nation's largest mortgage servicers. Senator Warren expressed concerns about the adequacy of the settlement, especially given FHA's currently troubled fiscal condition.  The Senate Banking Committee recently marked up the FHA Solvency Act (S. 1376), and the FHA's financial challenges have generated significant attention in Congress.

"I am concerned that this might be yet another example of the federal government's timid enforcement strategy against the nation's largest financial institutions," wrote Senator Warren in the letter. "Settlements are important and play a necessary role in any enforcement regime, but it is critical that the government take steps to maximize its leverage and avoid settling on the cheap.  Rushed and inadequate settlements fail to fully compensate victims and taxpayers and insufficiently deter future misconduct."

Last year, the Department of Justice (DOJ), 49 state attorneys general, and the Department of Housing and Urban Development (HUD) entered into a settlement agreement with the nation's five largest mortgage servicers. As part of the agreement, the servicers paid about $225 million to obtain releases from False Claims Act liability stemming from their pervasive submission of fraudulent mortgage insurance claims to the FHA and other agencies from 2008 to 2010. A portion of the $225 million settlement payment was deposited in FHA's Capital Reserve Fund.

In the letter, Senator Warren points out that the damages collected represent only 0.6% of what appears to have been the total potential liability faced by the servicers for defrauding the government based on the public record.  She asks DOJ for an explanation of how the settlement figure was determined, any analysis of the cost to the taxpayer of servicers' fraudulent conduct, documents related to the DOJ's settlement decision, and an accounting of how much of the settlement payment has been made to FHA to date and how much will be ultimately paid out.