In this interview, Adam Feinberg discusses the False Claims Act, which is becoming a top legal concern for mortgage companies that do business with the government. Given the large amount of federal funding in the mortgage market today, the False Claims Act will have a significant impact on the mortgage industry. For example, any misconduct in connection with the origination of a Federal Housing Administration (FHA)-insured mortgage can create False Claims Act liability if the mortgage goes into default and the government pays an insurance claim.
When asked why the False Claims Act is resurfacing just now and not earlier in the mortgage crisis, Feinberg suggests that although significant fraud likely occurred in connection with the many subprime loans that helped cause the mortgage crisis, those loans typically did not directly put the government’s money at risk, so the False Claims Act had no application. As the subprime mortgage market collapsed, the number of FHA-insured loans skyrocketed. As a result the number of False Claims Act cases against mortgage lenders is likely to increase.