The Department of Justice (DOJ) announced that M&T Bank has agreed to pay the United States $64 million to settle allegations that it violated the False Claims Act (FCA) by knowingly underwriting unqualified mortgage loans insured by the Federal Housing Administration (FHA).  The FHA alleged that M&T Bank misused government programs designed to expand homeownership, which resulted in homes being foreclosed upon across the country, causing undue harm to homeowners, and crippling the housing market.

Since 1934, the FHA has insured over 34 million loans through the U.S. Department of Housing and Urban Development (HUD), allowing lenders to make loans to borrowers that have less than perfect credit.  Loan guidelines, including debt-to-income ratios, specific credit requirements, and maximum loan amounts, were created by the FHA in order to protect the borrower and the lender.   The FHA’s program allows lower income borrowers to purchase homes by insuring qualified loans made by a direct endorsement lender (DEL), such as M&T Bank.  If the borrower defaults on the loan, FHA guarantees payment to the lender.  However, a participating lender may only submit creditworthy loans to the FHA if they meet certain requirements.

According to the lawsuit, M&T violated the FCA when it falsely claimed that mortgage loans it had underwritten and made were qualified for FHA insurance. When the borrower defaulted on the loan, M&T Bank filed claims on the FHA insurance to recover its losses.  As a consequence of M&T’s falsifications, the FHA incurred huge monetary losses on these unqualified loans and taxpayers and homeowners were gravely affected when numerous homes were foreclosed, causing a decrease in the value of property in many neighborhoods across America.

These types of banking fraud cases are not new for the banking industry, and in an effort to reduce and ultimately eliminate banking fraud practices, President Barack Obama’s Financial Fraud Enforcement Task Force was designed to investigate and eventually prosecute financial crimes.  In the past several years, other lending institutions such as SunTrust, JPMorgan, and U.S. Bank also agreed to settlements brought on by federal and state regulators for unqualified mortgage loans.

If you have information concerning a potential case involving banking fraud, do not hesitate to take action. It is possible that you might be able to bring your own lawsuit or qui tam case under the False Claims Act, acting as a whistleblower on behalf of the US government. Before filing your lawsuit, be sure to consult with an attorney familiar with the intricacies of the False Claims Act, as these attorneys are best equipped to help protect your rights and help you gain your share of any monetary reward from a potential settlement.