Golden First Mortgage Corp., and its owner, operator and President, David Movtady, have settled a civil mortgage fraud lawsuit alleging misconduct in connection with Golden First‘s participation in the FHA Direct Endorsement Lender Program.
The Government’s complaint, filed in April 2013, and amended in August 2013 (the “Amended Complaint”), sought damages and civil penalties under the False Claims Act for years of misconduct in connection with Golden First’s participation in the Federal Housing Administration’s Direct Endorsement Lender Program. In the settlement approved in Manhattan federal court by U.S. District Judge Jesse Furman, Movtady and Golden First admitted, acknowledged, and accepted responsibility for conduct alleged in the Amended Complaint, specifically that they failed to maintain a compliant quality control program and therefore did not conform to all U.S. Department of Housing and Urban Development and FHA regulations applicable to the Direct Endorsement Lender Program.
This conduct was contrary to the representations in Golden First’s annual certification, including the annual certification signed by Movtady on September 15, 2008. The defendants also agreed to a $36 million judgment against Golden First and a $300,000 payment from Movtady. Finally, the settlement permanently bars Movtady from conducting any business with the federal government.
According to the allegations contained in the Complaint, the Amended Complaint, and other public court filings:
Pursuant to the settlement, the United States will obtain a $36 million judgment against Golden First and recover $300,000 from Movtady, individually, within six months of the settlement. Movtady will also be permanently barred from conducting any business with the federal government. As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for the following misconduct:
Golden First failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;
Contrary to representations in Golden First’s annual certifications, including an annual certification signed by Movtady on September 15, 2008, Golden First did not conform to all applicable HUD-FHA regulations;
Golden First endorsed certain loans for FHA mortgage insurance that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and
Golden First submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by Golden First that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those loans defaulted.
Preet Bharara, the United States Attorney for the Southern District of New York, announced the settlement.
Mr. Bharara thanked HUD’s Office of the Inspector General for its assistance in this case.
Manhattan U.S. Attorney Preet Bharara said: “This settlement holds Golden First and its owner, David Movtady, accountable for lying to the Government about compliance with HUD requirements and approving bad loans. This type of conduct costs the United States millions of dollars when the loans inevitably default, and this Office is committed to snuffing it out.”
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Lawrence H. Fogelman are in charge of the case.
