Allied Home Mortgage execs tagged in whistleblower suit joined by Uncle Sam on loan fraud

Allied Home Mortgage Corp’s CEO Jim Hodges and Exec VP Jeanne Stell have been named as defendants in a federal action joined by Uncle Sam and originally brought by whistleblower Peter Belli who was a branch manager. The government alleges that Allied submitted false loan certifications to the Department of Urban Development to obtained HUD-backed insurance for mortgage loans.

The Complaint says that for more than 10 years, Allied originated loans out of hundreds of branches it never dislocsued to HUD and that these “shadow branches” operated in regions which HUD had suspended Allied’s power to originate loans given the areas’ high default rates.

The suit also details that Allied lied to obtain HUD approval for its branches, falsified quality control reports and that it fabricated reports that included verification of borrowers’ income and employment when the verifications had in fact not been done.

The lawsuit is considered a model for other suits filed around the country relating to similar fraud by banks in obtaining HUD backed insurance as the practices are considered rampant and the difference now is that whistleblowers are coming forward to reveal the fraud under the False Claims Act, allowing them to receive a portion of what the government recovers.

Jeffrey Newman represents whistleblowers.