Department of Justice SealDepartment of Justice
Thursday, May 22, 2008
(202) 514-2007
TDD (202) 514-1888

National City Mortgage to Pay $4.6 Million to Settle False Claims Allegations Involving Federally Insured Mortgages

WASHINGTON National City Mortgage Inc. has agreed to pay the United States $4.6 million to settle allegations arising under the False Claims Act concerning 58 federally insured loans for mortgages submitted to the Department of Housing and Urban Development (HUD), the Justice Department announced today.

National City, a mortgage lender headquartered in Miamisburg, Ohio, has "direct endorsement" authority to underwrite HUD-insured mortgage loans and submit them to HUD for insurance endorsement. Direct endorsement is a mechanism that allows a pre-approved lender to loan a low or moderate income borrower money for a mortgage, and protects that lender against loss in case of default. This program helps low and moderate income families become homeowners by lowering some of the costs associated with mortgage loans and providing protection to lenders. Lenders are encouraged to make loans to borrowers who might not be able to meet conventional underwriting requirements but are otherwise creditworthy.

HUD regulations require that the lender make certain certifications to the Federal Housing Administration (FHA) when it is submitting loans for insurance coverage more than 60 days from the loan closing, referred to as "late endorsement loans." One such certification and requirement is that the loan payment is not more than 30 days past due when submitted for FHA insurance coverage. The government alleges that National City improperly submitted 58 late endorsement loans for FHA insurance coverage that were not current, in violation of FHA regulations.

"HUD's vital mortgage insurance programs assist lenders that make the American dream of home ownership accessible to more people, but lenders must follow HUD’s rules and be held accountable if they knowingly submit loans that are not eligible for insurance," said Gregory G. Katsas, acting Assistant Attorney General for the Justice Department's Civil Division.

"This settlement shows this district's serious commitment to stamping out fraud and maintaining the integrity of the federally insured mortgage program," said Stephen J. Murphy, U.S. Attorney for the Eastern District of Michigan. "This office will continue to use all tools available to it, including civil enforcement, to protect all government programs and the people who benefit from them."

The case was handled jointly by the Justice Department's Civil Division and the U.S. Attorney's Office for the Eastern District of Michigan in Detroit, with investigative assistance provided by HUD’s Office of the Inspector General.