PrimeLending Mortgage Fraud Case: Two Loan Pools, Two Payments, No Admission

PrimeLending agreed to pay more than $6,750,000 to resolve its mortgage fraud case over alleged FHA underwriting, incentive and review failures. HUD’s Office of Inspector General also reported a separate $6,749,673 indemnification payment covering different loans.

PrimeLending, a PlainsCapital company, faced allegations that it originated loans ineligible for Federal Housing Administration insurance. The Department of Housing and Urban Development’s Office of Inspector General reported the allegations and assisted the Justice Department and the U.S. Attorneys’ Offices for Kansas and Northern Texas in the matter. We find the bargain absurd: millions paid over allegedly ineligible mortgages, nothing admitted under either agreement.

For someone who worked with the loan files or reimbursement accounts, the important distinction is which loans each payment covered. This page follows PrimeLending’s separate loan groups and reported payments, while our page on mortgage indemnification and false claims explains how the repayment obligation fits into a fraud inquiry.

The PrimeLending Settlement Covered an Earlier Loan Pool

The settlement concerned 79 FHA loans originated from January through December 2008. According to the Inspector General’s account, the settlement addressed allegations that underwriting, incentive and review failures made those loans ineligible for insurance. The separate indemnity concerned 160 loans originated from January 1, 2009 through December 31, 2012.

For an employee reconciling FHA accounts, the covered-loan schedule ties each agreement to the affected mortgages. An agreement date alone cannot show whether the same loan appears under more than one repayment obligation.

The FHA underwriting and insurance process explains why the original loan file matters. An approved lender funds or acquires a mortgage, and FHA provides insurance on eligible loans. Under Direct Endorsement, the lender determines eligibility and submits the documents for insurance without HUD reviewing every application beforehand.

FHA lenders make loan-level certifications as well as annual institutional certifications. The loan certification connects an assurance to the mortgage submitted for insurance, while the annual certification concerns the lender’s continued program participation. For an insider, the file behind the assurance and the person who adopted it matter as much as the approval itself.

That puts the lender’s underwriting decision before the later insurance claim. The employee who reviewed the file may know what supported the approval, while a quality-control employee may know what a subsequent review found and who received the findings. In a case about allegedly ineligible loans, we connect those decisions to the certification and the claim that reached government money.

Is a Settlement the Same as Cash Collected?

A settlement creates an obligation to pay, while a receipt records money collected. The Inspector General reported separate payments under the indemnity and the principal settlement.

The Inspector General reported the indemnification payment on October 22, 2018. PrimeLending entered the principal settlement on October 23, 2018.

The principal settlement allocated $3,375,163 to HUD, less the Justice Department’s collection fees. The Inspector General reported payment of HUD’s allocation after those fees on October 29, 2018. HUD’s allocation was a component of the settlement, while the indemnity payment concerned the other loan pool.

Fifth Third Shows Why Recording the Indemnity Matters

Fifth Third Bancorp’s separate FHA case also involved a settlement for loans on which HUD had paid claims and a separate indemnification agreement. In its October 6, 2015 announcement, the Justice Department said Fifth Third admitted failing to report loans it knew were defective. The matter also included indemnity against future losses, making the later tracking of covered loans important.

A September 28, 2018 Inspector General memorandum found that HUD had not properly recorded Fifth Third’s indemnities in its system. The resulting billing problems led the Inspector General to recommend $311,699 in reimbursement for property losses and loss-mitigation payments. We find it absurd that HUD could secure repayment promises and then fail to put them properly into its own system.

The audit also found that all 381 loans in a later indemnification agreement were already within an earlier pool of 920 loans. PrimeLending’s settlement and indemnity covered different pools, while Fifth Third’s agreements overlapped. An employee with the covered-loan schedules can see a distinction that a list of agreement dates would miss.

What a PrimeLending Loan File Could Add

An insider’s knowledge can connect the loan decision to the government’s payment and the company’s response. In a matter involving underwriting, incentives and reviews, we examine what the file said when the lender approved the loan, what later reviews found and which decision-makers received those findings. The original input, the adopted certification and the response to a warning each tell a different part of that story.

The useful mortgage whistleblower evidence may sit across underwriting, quality control, servicing and repayment accounts. Lenders can retain the supporting records even when the agency’s initial file contains fewer documents. The employee who understands how those records connect can explain a discrepancy that a settlement amount alone never reveals.

For someone handling FHA claims or indemnity billing, the financial support includes expenses, interest, receipts and disbursements affecting the insurance payment. Those entries connect the amount paid to the mortgage and the later reimbursement obligation. Our page on mortgage insurance payments and government net loss follows what leaves the government and what comes back.

For this kind of case, the loan schedule connects the financial account to the lending conduct. A certification identifies the assurance given to FHA, a review records what became known inside the company, and a receipt identifies the obligation paid. We work with insiders to establish those connections and bring in mortgage fraud whistleblower lawyers who understand the insurance and repayment questions.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our work starts with what you know about the loan decisions, the warnings and the payments, and builds the case around that evidence.

You Know Which Loans the Payment Covered

If you handled FHA approvals, review findings or indemnity accounts, talk with our Whistleblower Experts about the loans approved and the warnings raised. We help build your strongest mortgage whistleblower case, find the mortgage fraud whistleblower lawyers it needs and stay beside you as the case develops.