Mortgage Fraud as the Basis for a Qui Tam (Whistleblower) Lawsuit

Although claims of mortgage fraud are abundant in our daily news stories (and perhaps the personal accounts of our family and friends), not all mortgage fraud forms the basis of a qui tam (whistleblower) lawsuit. In order to bring a qui tam suit in which a relator (the whistleblower) files suit on behalf of the government and may be entitled to a portion of the government’s recovery, there must be evidence of some sort of fraud against the government. Thus, fraudulent conduct by banks against homeowners or an individual against their lender would not necessarily give rise to a successful qui tam action, absent evidence of harm suffered by the government.

A possible example of such fraud is the subject of a lawsuit currently pending against Deutsche Bank AG and its subsidiary MortgageIT Inc. in the U.S. District Court for the Southern District of New York.[1] In that case, brought under the Federal False Claims Act, the United States has alleged, among other things, that Deutsche Bank and MortgageIT falsely certified that they had complied with various HUD (Department of Housing and Urban Development) requirements in order to obtain FHA (Federal Housing Administration) insured loans on behalf of their borrowers. More specific examples of the fraudulent conduct include allegations of failing to conduct due diligence in connection with a gift being used to fund a transaction, failing to assemble a borrower’s credit history, failing to document and verify a borrower’s investment in a property, failing to verify a borrower’s employment, and failing to secure a deposit—all while certifying that such due diligence had been completed. The United States further alleged that in each instance, the borrower subsequently defaulted on the mortgage and, as a result, HUD paid hundreds of millions of dollars in FHA insurance claims.[2]              

If you have witnessed or otherwise have personal knowledge of the government being cheated out of money through the fraudulent conduct of a bank, its members or employees, or any other entity or individual, you may be able to file a qui tam lawsuit to assist the government in recovering that money, and attorneys at Waters & Kraus, LLP will be happy to talk to you about your potential case.

[1] United States v. Deutsche Bank AG, et al., Docket No. 11-CIV-2986 (S.D.N.Y May 9, 2011).

[2] See id.

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Melanie Garner is an attorney at Waters & Kraus, LLP, in the firm's Baltimore office. She focuses her practice on toxic tort, product liability, and qui tam (whistleblower) cases.

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