In the spring of 2012, we first wrote about a massive federal false claims action involving Wells Fargo, Washington Mutual, Chase Manhattan Mortgage, Citimortgage, General Motors Acceptance Corporation, Countrywide, Bank of America, US Bank, Fifth Third Bancorp plus a dozen smaller lenders. The government says they were improperly overcharging fees to America’s veterans seeking Interest Rate Reduction Refinancing Loans or “IRRRL’s.”
According to the Department of Veterans Affairs, an IRRRL is available to active duty military and veterans who hold VA guaranteed loans. The program is designed to help keep soldiers in their homes. Many soldiers struggle to pay bills at home while deployed to faraway lands. Although not a loan forgiveness plan or “bailout,” the program can mean the difference between someone keeping their home or landing on the street. By reducing the interest rate on a government backed loan, payments can be reduced.
Since the goal of the IRRRL program is to assist veterans, closing costs on these loans are strictly limited. The VA authorizes a flat fee not to exceed 1% of the loan amount. Included in that fee are costs for title searches. There are also specific fees that can’t be charged to the borrower such as attorneys closing fees.
Lenders that want to participate must certify that they are complying with these fee restrictions and other VA requirements.
Beginning in 2012, we reported how many lenders were reportedly tacking illegal fees onto the loan. When we last posted a story on this topic, some lenders had already settled and paid millions in penalties. We hoped the story was over.
Later that year we learned from some concerned vets that Bank of America was selling their loans when vets sought to obtain an interest rate reduction. In one case, a veteran reports that Bank of America “lost” his paperwork repeatedly over many weeks. When he was finally set to close the new modified loan, BOA announced that the loan had been sold. The new servicer conveniently doesn’t participate in the IRRRL program.
If this true, Bank of America is thumbing its nose at both the courts and those who faithfully served their country. Those claims are disturbing and important to us. Frequently we bring a class action case against the lender. An individual borrower might not be able to sue a lender over a couple thousand bucks in interest charges but a class of thousands of borrowers has real clout.
We also write these posts hoping to hear from mortgage company or bank employees. The lawsuit reference at the beginning of this post was brought by two whistleblowers could earn millions for coming forward and reporting the misconduct. Whistleblowers help stop fraud and can earn millions in cash reward money from the government. In the case of IRRRL fraud, they are also standing up for veterans. More on whistleblower rewards below.
In 2015, a federal appeals court refused an attempt by Wells Fargo to escape the massive IRRRL fraud suit referenced in the first paragraph of this post. By that time, the whistleblower action had already recovered $161,000,000.00. Shortly after the appeals court ruling, Wells Fargo settled the whistleblower lawsuit for $108 million.
Banks Still Engaging in IRRRL Loan Fraud
After several banks ultimately settled for a quarter of a billion dollars, one would think that lenders learned their lesson. Don’t overcharge vets! But the industry hasn’t learned.
In August 2019, the VA’s Inspector General and the Justice Department issued subpoenas to at least eight IRRRL lenders. The new allegations are that lenders are churning borrowers by repeatedly offering borrowers a slightly lower rate. The lenders make their money by the repetitive commissions.
For example, lets say a vet has a 4.5% interest rate but qualifies for a 4% rate. Rather than simply offer the better rate, an unscrupulous lender will offer a 4.4% rate and shortly after refinancing, offer a 4.3% rate, etc. The borrower gets hit with thousands of dollars of unnecessary closing fees.
Seeking Mortgage Company Whistleblowers
The federal False Claims Act allows the government to pay rewards to insiders with information about fraud involving government funds. If you work for a mortgage company engaged in IRRL fraud or churning, you may be entitled to a reward. Your information may be useful to help us help veterans struggling to remain in their homes.
If you have information, believe you qualify as a whistleblower and wish to file a false claims suit to earn your share of award monies or are a veteran who has been defrauded by a lender, please contact us. All inquiries will be kept in strict confidence. Please contact attorney Brian Mahany online, by email or by phone 202-800-9791.
Mahany Law – America’s Fraud Lawyers. Services available nationwide.