Guild Mortgage Company (Guild) of San Diego, California, agreed to pay the U.S. government $24.9 Million to settle allegations that Guild violated the False Claims Act by knowingly breaching material program requirements when underwriting and originating mortgages insured by the Department of Housing and Urban Development’s Federal Housing Administration (FHA). The settlement resolves allegations that Guild knowingly approved materially ineligible loans that later defaulted and resulted in FHA mortgage insurance claims, failed to comply with program rules requiring lenders to maintain programs to prevent and correct underwriting deficiencies, and failed to report materially deficient loans that it identified.

Participants in the FHA mortgage insurance program are authorized to originate and underwrite mortgages without first having the government review the loans for consent by the agency’s underwriting and origination requirements. If an FHA-insured loan defaults, the loan holder can then recover from the United States for particular losses. Lenders must follow FHA rules to ensure that only mortgages meeting critical credit and underwriting criteria are insured by the government.

“The Federal Housing Administration insurance program is a critical tool that helps hardworking Americans achieve their dream of homeownership. Any abuse of that program is unacceptable, and the bad actors will be held accountable,” said Rae Oliver Davis, U.S. HUD Inspector General. “This case highlights the effectiveness and importance of whistleblower programs.”

A former head of quality control reported the allegations at Guild, Kevin Dougherty. The qui tam, or whistleblower, provisions of the False Claims Act permit private parties to sue on behalf of the government for false claims and receive a share of any recovery. Dougherty will receive $4,980,000 as his share of the recovery.

“The United States is committed to providing Americans opportunities to own their own homes,” said Acting U.S. Attorney for the District of Columbia Michael R. Sherwin. “This settlement reflects the diligent work of officials from the Department of Justice and HUD to ensure that the programs that provide those opportunities are operated with integrity and in accordance with requirements established by law.”

“As this settlement demonstrates, we are committed to holding mortgage lenders accountable when they choose to abuse the integrity of vital government programs that are designed to assist homeownership,” said U.S. Attorney Robert Brewer for the Southern District of California. “We also commend the whistleblower for coming forward, exposing these wrongs, and working with the government investigative team.”