NEW YORK, Nov. 1 (UPI) -- Federal prosecutors in New York said Tuesday they are suing a major mortgage company for its allegedly risky lending practices that led to massive foreclosures.
The U.S. attorney's office accuses Allied Home Mortgage Corp. and its affiliate, Allied Home Mortgage Corp., of nearly a decade of misconduct in their residential mortgage lending practices.
The prosecutors said in a release Allied originated more than 110,000 Federal Housing Administration mortgages during those years, with more than 30 percent ending up in default. Allied's default rate rose to 55 percent for loans originated in 2006 and 2007, the prosecutors said.
The U.S. attorney's office alleges the FHA has paid insurance claims totaling $834 million for mortgages originated and fraudulently certified by Allied that are now in default. Another 2,509 bad loans could mean another $363 million will have to be paid out.
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Besides the two companies, the civil lawsuit also names Allied President and Chief Executive Officer Jim C. Hodge and Executive Vice President Jeanne L. Stell as defendants.
The suit seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
"As described in the complaint, Allied and its CEO exploited a government insurance program to engage in a wholesale shifting of risk away from itself -- playing a lending industry equivalent of heads-I-win and tails-you-lose," U.S. Attorney Preet Bharara said.
"The losers here were American taxpayers and the thousands of families who faced foreclosure because they could not ultimately fulfill their obligations on mortgages that were doomed to fail. The alleged conduct in this case is egregious and our investigation is ongoing."
