The Associated Press has reported that the federal government sued one of the nation’s largest privately held mortgage brokers on Tuesday, saying its decade-long lending practices amounted to fraud and cost the government hundreds of millions of dollars and forced thousands of American homeowners to lose their homes.
The lawsuit in United States District Court in Manhattan sought unspecified damages and civil penalties and named as defendants Allied Home Mortgage Corporation; its founder, Jim Hodge; and Jeanne Stell, the company’s executive vice president and director of compliance.
This was announced by Preet Bharara, the United States attorney based in Manhattan. “The losers here were American taxpayers, and the thousands of families who faced foreclosure because they were could not ultimately fulfill their obligations on mortgages that were doomed to fail,” he said.
According to the lawsuit, nearly 32 percent of the 112,324 home loans originated by Allied from Jan. 1, 2001, to the end of 2010 have defaulted, resulting in more than $834 million in insurance claims paid by HUD.
The lawsuit said the default rate climbed to “a staggering 55 percent” in 2006 and 2007, at the height of the housing boom, when the government paid $170 million to settle Allied’s failed loans. It said an additional 2,509 loans are now in default and that HUD could face $363 million more in claims.