HOUSTON -- The reverberations of the 2008 housing market collapse and financial meltdown continue to be felt.
A jury in the Houston Division for the Southern District of Texas, on Nov. 29, fined Texas-based Americus Mortgage Corp., and AllQuest Home Mortgage Corp., previously titled Allied Home Mortgage Capital Corp and Allied Home Mortgage Corp, $94 million for knowingly violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act.
Additional fines are expected to be determined at a later date.
The two company’s founder and CEO, Jim Hodge, was also fined $7.37 million for conducting similar violations during the lead-up to the financial collapse eight years ago.
Hodge is no stranger to run-ins with the law.
In 1991 his Mercantile Savings Bank, based in Mississippi, was seized by federal authorities after he was found to have misused bank funds, costing tax payers $5.7 million. Twelve years later, Hodge again was hit with accusations of wrongdoing, this time conducting improper branch management operations and allegations of charging excessive credit research fees on borrowers.
In 2005 Hodge’s company, Allied Home Mortgage, settled out of court after it was accused of inflating the income of mortgage applicants. Two years later the misuse of a rural rental home loan program resulted in Allied being sued by the U.S. Department of Agriculture. Finally, in 2007, the government said Hodge and Allied were not paying hundreds of employees correctly, a claim settled out of court.
The Nov. 29 decision was a victory for the government, which sought to redress the damages caused by Allied's and Hodge’s lies to investors and the government over the origin of bad loans. These violations were carried out by 100 "shadow" branch offices, which essentially laundered bad loans. These loans lacked required approval from the U.S. Department of Housing and Urban Development, using the ID numbers of approved branches.
The case, U.S. v. Allied Home Mortgage Corporation, U.S. District Court, Southern District of Texas, No. 12-02676, originated in New York in 2011. It initially targeted loan underwriters who were endorsing mortgages issued by the Federal Housing Administration's Direct Endorsement Program. In 2012 the case was transferred to Texas.
A lawyer for the defendant said appeals were planned, which would go to the Fifth U.S. Circuit Court, based on the government seeking damages for “hyper-technical violations of federal regulations” that bore no relation to any market conditions that would have contributed to the loans defaulting.