The legal aid group Advocates for Basic Legal Equality (ABLE) has taken a novel approach to using the False Claims Act by initiating a lawsuit against U.S. Bank. The case claims that U.S. Bank collected payments from the Federal Housing Administration (FHA) for FHA-backed loans deemed to be in default, rather than meeting its obligations to work out options with the borrowers.
ABLE relied on the information it obtained from customers and borrowers of U.S. Bank in bringing its suit. Borrowers, such as Mr. Hayward Ferrell, obtained mortgages from U.S. Bank guaranteed by the FHA. If a borrower defaults on an FHA loan, the government agency makes payments to the loan-issuing bank to make the bank whole. The FHA requires, however, that these banks make an effort to work with their borrowers to mitigate loss — so the government can limit expenditures on these loans.
In this lawsuit, ABLE has taken the position that U.S. Bank failed to take the necessary steps to work with borrowers like Mr. Ferrell to prevent them from defaulting on their mortgages. Instead, the group claims that the bank defaulted Mr. Ferrell and other borrowers between 2001 and 2011 so that it could make false claims for payment to FHA, receiving at least $2.37 billion in payments on these claims.