This post updates the article published on Insurance Claims and Bad Faith Law Blog on Sunday, April 7, 2013, "FIRREA is Not a Furry Creature for D&O Insurer DJA". See also the post on Insurance Claims Bad Faith Law Blog published on Tuesday, April 9, 2013, "MISCONDUCT INDUCING FHA INSURED MORTGAGES: LITIGATION ALLOWED DESPITE SETTLEMENT AGREEMENT ".
The Department of Justice appears to have begun a policy of filing civil lawsuits to recover Insurance payments made by the Federal Housing Administration (FHA). These lawsuits involve allegations against Directors and Officers of Mortgage loan originators inducing the FHA to insure Mortgages which has cost the FHA millions of dollars and will cost the FHA more in past and future Insurance payments on account of the bad and baseless Mortgages in question. The enforcement of this policy clearly appears to be left to the local United States Attorneys.
For example, such a lawsuit was filed on Thursday, April 4, 2013 by the United States Attorney's Office for the Southern District of New York. In it, the United States based its action on the following legal sources: "The Government brings this action seeking damages and civil penalties under the False Claims Act, 31 U.S.C. §§ 3729 et seq., the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1833a, and the common law." (Paragraph 1, page 2, Complaint, United States v. Movtady and Golden First Mortgage Corp., Filed April 4, 2013, S.D.N.Y. Case No. 13-cv-02227, 32 pages). Download Complaint.United States of America v. Movtady and Golden First Mortgage Corp. (SDNY Filed 04.04.13, Case No. 13.cv.02227)
The "common law" Claims include alleged "Gross Negligence," negligence, and Breach of Fiduciary Duty.
If successful, this civil action and other lawsuits like it, may return substantial amounts of money to the Federal Treasury, which of course means returning substantial amounts of money to the Federal Taxpayers. The United States Attorney's Office seeks not only Compensatory Damages in this Complaint, but also Penalties and Treble Damages. The total award could be as much as $100 Million.
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