Under the False Claims Act’s qui tam provisions, individual private plaintiffs – who are often in a better position to report and relay the details of fraud against the government – can receive rewards of up to 30 percent of the total settlement or verdict obtained on behalf of U.S. taxpayers. These provisions are designed to incentivize integrity and encourage those with information of fraud to come forward with their facts and allegations.
In December 2014, one of the whistleblowers responsible for the historic $16 billion settlement with Bank of America (the company that acquired Countrywide in 2008) earned $57 million for his role in coming forward with allegations of mortgage lending fraud by the behemoth residential home loan lender. The reward is one of the largest in the history of the False Claims Act, and stands as a reminder that coming forward may be difficult at first – but can often prove worthwhile and lucrative in the end.
Details of Countrywide mortgage fraud case
The facts of the Countrywide mortgage fraud case have been widely exposed over the past several years; however, it is often helpful to review the details of mortgage and lending fraud in order to increase awareness of this costly and dangerous financing practice.
For a period of several years leading up to the market meltdown, Countrywide had devised a scheme known as the “Hustle,” wherein applicant’s loans were advanced through the underwriting and approval process using a “high speed swim lane.” In other words, applicants – many of whom were not creditworthy or earning enough to repay the terms of the mortgage – were placed on the fast track to approval and doomed for default.
And default they did – to the tune of billions of dollars in toxic mortgage notes, foreclosures, ousted families, and financial mayhem.
And, in addition to the issues plaguing homeowners’ across the United States, federal agencies like Fannie Mae and Freddie Mac took huge hits after agreeing to purchase many of these struggling notes based on inflated property values provided by Countrywide and Bank of America.
Courageous whistleblowers come forward
The case against Countrywide and Bank of America occurred as a result of a concerted effort between four whistleblowers and a small New Jersey-based mortgage firm. The whistleblower enjoying the $57 million payout was once an executive of Countrywide and, after taking a close look at Countrywide’s lending practices, he brought the issues to the attention of several other executives. Since the case, he has opened his own firm specializing in identifying fraud in property appraisal work.
Two other whistleblowers will also enjoy payouts as a result of their willingness to come forward. One such employee worked as a former appraiser for Countrywide, while another continues to work for Bank of America in an undisclosed role.
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