HUD and Justice Department Reach Agreement on False Claims Act

In an effort to convince more banks to offer Federal Housing Administration (FHA) financing, U.S. Housing and Urban Development Secretary Ben Carson and U.S. Attorney General William Barr yesterday issued a Memorandum of Understanding (MOU) between the two agencies that sets guidance on the appropriate use of the False Claims Act (FCA) for violations by FHA lenders.

The MOU fulfills a key component of HUD’s Housing Finance Reform Plan.

“This agreement clearly outlines our FHA mortgage program requirements, so they do not impede or discourage lenders from offering affordable FHA-insured loans to credit-worthy borrowers,” Carson said. “In taking these steps, we are fulfilling an important element in our Housing Finance Reform Plan and making clear to all responsible lenders that FHA’s mortgage program is a program they should participate in.”

“This MOU sets forth a robust and collaborative process for deciding when to pursue False Claims Act cases to remedy material and knowing FHA violations,” added Barr. “DOJ and HUD will work together to determine when HUD’s administrative remedies are sufficient, or other recourse is appropriate, to address harm to the borrower, the taxpayer, or the government.”

This interagency understanding is intended to address concerns that uncertain and unanticipated FCA liability for regulatory defects led many well-capitalized lenders, including many banks and credit unions statutorily required to help meet the credit needs of the communities in which they do business, to largely withdraw from FHA lending.

The MOU is part of a comprehensive plan to bring greater clarity to regulatory expectations within the FHA program. These new and revised components are intended to make affordable FHA-insured mortgages more accessible to qualified borrowers, reduce risks within the FHA program, and preserve appropriately tailored remedies.

Learn more about the MOU.

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