The owner of a former Federal Housing Administration correspondent that originated thousands of FHA mortgages has been sued over dozens of defaulted loans. The executive failed to disclose that he had been indicted.
A civil complaint was filed Friday by the Department of Justice in U.S. District Court for the Northern District of Illinois against Robert S. Luce, a news release said.
The lawsuit seeks recovery under the False Claims Act and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act.
Luce is the founder and president of MDR Mortgage Corp., a former FHA mortgagee.
The government alleges that Luce hid from the Department of Housing and Urban Development that he had been indicted on April 7 2005, for mail fraud, wire fraud, obstruction of justice and making false statements.
The indictment was filed in connection with an investigation by the Securities and Exchange Commission. He pled guilty to one count in July 2008, and was sentenced in January 2009 to probation.
MDR was an approved FHA correspondent from December 1993 until October 2008 — when FHA approval was voluntarily cancelled.
He allegedly carried on the ruse from April 2005 until October 2008, during which period FHA endorsed 2,359 loans from his Palatine, Ill.-based company. More than 90 of those loans subsequently defaulted.
Had HUD known about the indictment, his company would have been disqualified to originate FHA loans.
“Between April 2005 and October 2008, Luce represented to HUD, and caused MDR employees to represent to HUD, that he was not under criminal investigation or indictment,” the announcement said. “These statements were false at the time they were made, and Luce knew they were false at the time he or other MDR employees made them.”
HUD said it has paid $1.6 million in FHA mortgage insurance claims and related expenses so far on the MDR loans that were endorsed during the period.
United States of America, Plaintiff, v. Robert S. Luce, Defendant.
Case No. 11 C 5158, July 29, 2011 (U.S. District Court for the Northern District of Illinois).
United States, v. Robert Luce.
Case No. 05-CR-340-5, April 7, 2005 (U.S. District Court for the Northern District of Illinois).
