Reunion Mortgage, Inc. and its former co-owners, David Thayer, and R. Kent Harvey, have agreed to pay $1.04 million to settle allegations that the company submitted false claims to the Federal Housing Administration in violation of the False Claims Act, 31 U.S.C. §§ 3729-33.
The United States alleged that Reunion Mortgage falsely certified that certain loans met the U.S. Housing and Urban Development’s (“HUD”) requirements and were eligible for FHA insurance. The complaint further alleged that Reunion Mortgage knew that the company’s underwriters routinely failed to perform basic due diligence, failed to verify information in the loan file that bore directly on the borrower’s ability to make payments on the mortgage, and repeatedly certified mortgage loans that contained serious defects and departures from HUD’s underwriting standards.
Reunion Mortgage, now out of business, was formerly located in Milpitas.
The United States also alleged that Reunion Mortgage improperly issued a dividend to co-owners David Thayer and R. Kent Harvey that rendered the company insolvent and unable to pay its debts to the United States, in violation of the Federal Debt Collections Procedures Act.
United States Attorney Melinda Haag announced the settlement.
Ila C. Deiss is the Assistant U.S. Attorney who handled the case with the assistance of Michael Zehr, Tina Louie, and Sarah Oldridge. The case is the result of an investigation by HUD’s Office of the Inspector General’s Civil Fraud Division, and is part of HUD’s High Default Lender Initiative.
“This Office is committed to holding lenders accountable for fraudulent and reckless underwriting of federally insured FHA home loans. The systematic abuse of the system will not be tolerated,” said United States Attorney Melinda Haag.