Texas Mortgage Companies, Founder Must Pay $93 Million in Fraud Case: Jury

Reuters | December 1, 2016        A federal jury has ordered two Texas-based home mortgage entities and their chief executive to pay nearly $93 million for defrauding the U.S. government into insuring thousands of risky loans, according to court records.

Americus Mortgage Corp, AllQuest Home Mortgage Corp, and their founder, Jim Hodge, were found liable on Tuesday by a Houston federal jury for violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act.

The jury awarded nearly $93 million in damages, including $7.37 million against Hodge, a sum that is subject to mandatory tripling under the False Claims Act. Further penalties are expected, which U.S. District Judge George Hanks will set at a later date, Manhattan U.S. Attorney Preet Bharara's office said in a press statement released late on Wednesday.

During the period at issue, the companies were known as Allied Home Mortgage Capital Corp and Allied Home Mortgage Corp.

Wendell Odom, their lawyer, said he anticipated an appeal in the case, one of several the U.S. government has brought against lenders following the 2008 financial crisis.  Read more here.

Wells Fargo to Pay $50 Million to Settle Home Appraisal Overcharges

The New York Times | November 1, 2016       In the latest hit to the battered bank, Wells Fargo has agreed to pay $50 million to settle a class-action lawsuit that accused the bank of overcharging hundreds of thousands of homeowners for appraisals ordered after the homeowners defaulted on their mortgage loans.

The proposed settlement calls for Wells Fargo to automatically mail checks to more than 250,000 customers nationwide whose home loans were serviced by the bank between 2005 and 2010.

The checks will typically be for $120, according to Roland Tellis, a lawyer with Baron & Budd, the law firm that represented Wells Fargo’s customers. If a judge signs off on the settlement, as expected, the checks will be distributed next year.

When a borrower falls behind on a loan, mortgage contracts typically let the lender order an appraisal of the home’s current value. The cost of that appraisal, known as a “broker price opinion,” can be passed on to the borrower, but Wells Fargo used one of its own subsidiaries to conduct appraisals and then routinely marked up the cost, according to the lawsuit.

Borrowers would be charged $95 to $120 for a service that cost the bank $50 or less, the complaint said. The charges were then listed cryptically on mortgage statements, with vague descriptions like “other charges” or “other fees.”

“People who are behind on their loans are the people who can least afford to be charged marked-up fees, but unfortunately, that’s exactly what happened,” Mr. Tellis said.

Several homeowners filed suit against Wells Fargo in 2012 in a Northern California federal court. Last year, a judge granted class-action status to a portion of the claims related to racketeering charges.  Read more here.