A whistleblower lawsuit affecting thousands of American veterans was recently unsealed which alleges 13 banks and mortgage companies cheated veterans of millions of dollars. The whistleblowers have accused companies such as Wells Fargo, Bank of America, GMAC Mortgage, and J.P. Morgan Chase of charging illegal fees to veterans refinancing their home loans which were guaranteed by the Department of Veterans Affairs. The suit alleges that the companies charged illegal fees and hid the charges to obtain government guarantees for the loans. Our firm has proudly represented many veterans in lending, housing and employment discrimination matters.
The lawsuit was brought in the District Court of the Northern District of Georgia by two mortgage brokers and remained sealed till now. The lawsuit alleges that by adding in prohibited charges to the allowed fees, banks collected between $300 to $1,000 in hidden fees per loan. The plaintiffs filed suit on behalf of the U.S. government under the False Claims Act and seek to recover $5,500 to $11,000 in damages for each violation. The plaintiffs are Victor E. Bibby, who is President and chief executive of U.S. Financial Services, a company which provides mortgage services, and Brian J. Donnelly, who is the company’s vice president of operations. Donnelly helped veterans fill out their application forms and pick lenders for their loans.
The plaintiffs have stated that they were instructed by lenders not to show attorney’s fees on their estimates and were told to add it to the title examination fee. In figuring out the fraud, Donnelly looked at the VA handbook regarding Interest Rate Reduction Refinancing Loans (“IRRRL Loans”) which refers to fees that could be charged for transactions. According to the VA rules, veterans can be charged for recording fees and taxes, credit reports and other customary fees, but they cannot be charged for attorney’s fees or settlement closing fees. The banks and mortgage companies got around this rule by charging attorneys fees and hiding it under “title examination” or “title search” fees.
The Justice Department has not taken over the case yet but is reserving its right to do so. Sally Quillian Yates, the U.S. attorney for the Northern District of Georgia has stated that she “will continue to evaluate the merits of the case,” and “consider intervening. . . if it becomes appropriate to do so.” The lawsuit alleges that the government and all taxpayers have clearly been defrauded since tens of thousands of VA loans have resulted in default or foreclosures which will cost the government and all taxpayers hundreds of millions of dollars.
If the government does not intervene, the whistleblowers can collect from 24% to 30% of the recovery. If the government does intervene and takes over the lawsuit, the whistleblowers can still recover 15% to 25% of any recovery. To bring a whistleblower lawsuit, you must be the first person to bring evidence of the fraud to the government’s attention.
It is a outrage that such a massive fraud could be committed against veterans. In the past ten years, 1.2. million loans have been refinanced by veterans of which at 90% involved fraud. This fraud is not just a crime against veterans but is also a crime against all taxpayers. Since the U.S. government cannot possibly know of every fraud being committed against itself, the whistleblower statute is a great incentive for anyone who observes fraud being committed against the government. If you have observed fraud being committed against the government, call our experienced Whistleblower Attorneys at Villanueva & Sanchala at (800) 893-9645 to help you determine if you have a qui tam whistleblower case under the False Claims Act.
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