Walter Investment Management Corp. has agreed to settle a whistleblower lawsuit filed by a former executive of its reverse mortgage business.
The settlement revolves around the servicing of home-equity conversion mortgages by subsidiary Reverse Mortgage Solution Inc.
RMS provides business support to the mortgage industry. This includes the servicing of reverse mortgages on behalf of major financial institutions.
But an announcement from the Department of Justice alleges that RMS submitted false claims for debenture interest from the Department of Housing and Urban Development by failing to properly disclose that it had not met certain deadlines and, therefore, was not entitled to such interest payments.
The alleged actions occurred from August 2009 through March of this year “with the knowledge and support of” Walter.
According to the Justice Department,
HUD requires lenders and their servicers to obtain appraisals within 30 days of the loan becoming due and payable in order to determine whether to proceed with foreclosure, engage in a workout with the lender or deal with estate rights issues.
In addition, Walter — through subsidiaries
RMS, REO Management Solutions LLC and RMS Asset Management Solutions LLC — allegedly submitted fraudulent claims to HUD for the reimbursement of unlawful referral fees by representing them to be valid real estate commissions on liquidated foreclosures. These False Claims Act violations reportedly happened from July 2010 to October 2014.
“RMS often used straw companies to liquidate foreclosed properties,” the statement said. “Upon sale of the foreclosed property, the straw companies split the six-percent sales commissions: the real estate agents shared a five-percent sales commission and the companies kept a one-percent referral fee. These straw companies, in turn, deducted a small fee from the one-percent referral fee and kicked the remainder back to RMS.”
Today’s news release said Walter has agreed to settle the matter for $29.63 million.
A lawsuit was filed under the whistleblower provisions of the False Claims Act by former RMS executive Matthew McDonald. The government intervened in the action, and McDonald will receive $5.15 million as his share of the recovery.
