We have not been kind to the “too big to fail” banks and large mortgage companies in this blog. Companies like Allied Home Mortgage, HSBC and Bank of America are frequent targets of our anger and frustration. Yet when one of our whistleblower clients helped tag Bank of America for $16.65 billion last year, the bank was able to write the check and repay taxpayers. As much as we don’t like the corporate culture and behavior of many of these predatory institutions, they pay their fines when caught.
A recent study by the American Enterprise Institute’s International Center for Housing Risk says that thinly capitalized nonbanks are now making many residential loans. This is especially true when the loans involve riskier borrowers
The problem, of course, is that when these nonbanks don’t play by the rules, they are less likely to have the money to repay the government for faulty loans.
The Institute’s study reveals that the large bank share of FHA backed residential mortgages dropped from 65.4% in 2012 to just 29.6% in February. The nonbank share rocketed from 26.8% to 62.2% during the same time period.
So what happens if the nonbanks can’t repay the FHA on bad loans? Taxpayers are on the hook. Almost all residential loans are backed by the FHA, Fannie Mae or Freddie Mac meaning our tax dollars are once again on the line.
Nonbanks are financial institutions that can provide a wide range of banking services but do not hold deposits from customers. Because they don’t offer checking and savings accounts, they are not considered banks yet most of their activities must still follow banking regulations. Companies like Ocwen and Quicken Loans are examples.
The first line of defense against shoddy underwriting practices are whistleblowers, people inside the banks and mortgage companies with original source information of fraud and greed.
An 1863 law, the False Claims Act, can reward a whistleblower with up to 30% of whatever the government collects from wrongdoers. As mortgage companies nudge banks out of the mortgage market, early intervention becomes critical if the government wants to avoid more massive bailouts.
Recent court cases have demonstrated the government’s willingness to pay out large whistleblower awards, especially in the financial industry. Last year the Department of Justice paid out $635,000,000.00 to whistleblowers including $150,000,000 in just our Bank of America case.
Obviously not everyone receives an award that size.
To qualify for an award, a whistleblower must have original source information about fraud or misconduct involving a federally insured or funded program. That means most residential mortgages qualify.
Think you have what it takes? Give us a call. To date our clients have received over $100 million in whistleblower award monies. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731. All inquiries kept strictly confidential.
MahanyLaw – America’s Whistleblower Lawyers