HUD, DOJ Clarify Procedures for Handling False Claims Act Violations

In a significant move that could encourage more banks to engage in Federal Housing Administration lending, the Department of Justice and the Department of Housing and Urban Development announced today that they have signed a memorandum of understanding on how they will address potential violations under the False Claims Act. The MOU states that violations will be primarily addressed through HUD administrative proceedings and only referred to DOJ under certain circumstances.

The agencies issued the MOU to address growing concerns about FCA liability that have led to many well-capitalized lenders exiting the FHA market in recent years. According to HUD, depository institutions accounted for less than 15% of FHA originations in 2018, down from 45% in 2010.

“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,” said HUD Secretary Ben Carson. “In taking these steps, we are fulfilling an important element our Housing Finance Reform Plan and making clear to all responsible lenders that FHA’s mortgage program is a program they should participate in.”

ABA—which has long called on HUD to clarify FHA program guidelines to foster greater bank participation—welcomed this action from the agencies. The association is currently reviewing the details of the agreement and will review any forthcoming regulations as they are issued