MBA Letter of Support for Grassley Amendment on False Claims Act

The Mortgage Bankers Association last week sent a letter to Sen. Charles Grassley, R-Iowa, in support of his amendment to a bill that would make changes to enforcement of the False Claims Act.

Grassley’s amendment to S.2428, the False Claims Amendments Act of 2021 (https://www.congress.gov/bill/117th-congress/senate-bill/2428), would, said MBA Senior Vice President of Legislative and Political Affairs Bill Killmer, reduce the risk of “draconian” penalties for technical errors by mortgage lenders making FHA-insured loans, thus encouraging lenders to participate in FHA lending.

Killmer noted in the wake of the Great Recession, FHA and the Department of Justice have aggressively pursued mortgage lenders for technical, de minimis errors on FHA-insured loans in default that had no causal relationship to the reason for default. This experience, he said, forced many lenders to sharply reduce their lending via the FHA program or exit altogether. HUD and DOJ recently concluded years of work together to finalize key administrative changes and a memorandum of understanding outlining clear standards of materiality that reduce the risk of draconian penalties for immaterial data or documentation errors.

“Your amendment to S. 2428 strikes the proper balance and helps preserve these important changes while ensuring agencies continue to have the tools necessary to appropriately pursue False Claims Act remedies,” Killmer said in the letter to Grassley. “In addition, the changes to False Claims Act procedure found in the amendment will encourage more lenders to offer FHA-insured loans.”

The Senate continues to work on a final version of the bill.