Mortgage giants brought low by whistleblowers

by Ryan Smith08 Jan 2014
Two mortgage giants will pay the government more than $320 million to settle allegations that they falsified loan documents and made misrepresentations in order to secure federally funded insurance for home loans.

Home America Mortgage, Inc., and the now-bankrupt Taylor Bean & Whitaker settled a seven-year-long civil suit filed jointly by whistleblowers Stephanie Kennedy, former vice president of operations for Home America Mortgage, and Comfort Friddle, a former Home America loan processor.
Friddle and Kennedy alleged that Home America convinced the government to insure bad mortgages by falsifying documentation or hiding information about borrowers’ ability to repay the loans, according to a statement from Bothwell Bracker, the law firm representing the whistleblowers. The loans were then sold to Taylor Bean, providing fresh capital for Home America to repeat the scam. When the shoddy loans defaulted, the government was on the hook for the insurance.

“In this fashion, defendants pawned off hundreds of millions of dollars in bad loans onto the federal government,” stated Bothwell Bracker.
Friddle and Kennedy said they both witnessed the fraud firsthand, routinely observing Home America employees falsifying borrowers’ credit scores, assets and income. They alleged that when they tried to bring the fraud to the attention of their superiors, they were fired.

In 2006, Kennedy and Friddle filed a lawsuit against the companies under the False Claims Act. The suit, known as a qui tam complaint, was filed under a statute that allows private citizens to sue companies for defrauding the government.

“When companies like (Taylor Bean) and Home America commit fraud, everyone suffers,” Friddle said. “It's tempting to bury your head in the sand and pretend that you don't see what's happening, but if you don't speak up, everyone is harmed. The effects of this kind of fraud will be felt throughout our economy for years to come.”

Taylor Bean owner Lee Farkas was convicted of a raft of charges in 2011 and is currently serving a 30-year prison sentence. Friddle and Kennedy continue to pursue a case against Home America President Greg Hicks, according to Bothwell Bracker


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