MBA Voices Support for False Claims Act Reform Bill
The Mortgage Bankers Association threw its support behind legislation that would clarify how FHA-insured loans are treated under the False Claims Act.
Reps. Josh Gottheimer, D-N.J., and Lee Zeldin, R-N.Y., on June 1 introduced H.R. 5883, the Fixing Housing Access Act of 2018 (https://www.congress.gov/bill/115th-congress/house-bill/5993?r=2). The bill would clarify how civil actions brought against FHA-insured loans under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act, known as FIRREA, can be addressed.
The legislation clarifies and improves timing associated with potential violations and relevant statutes of limitations, as well as calculation of damages. The legislation also specifies that essential elements of a claim be proven for each individual claim rather than through use of statistical sampling. It also creates a threshold on “materiality” of claims, which the sponsors and MBA said would be a vital component of efforts to revive broad participation in the FHA program.
In a letter to Gottheimer and Zeldin, MBA Senior Vice President of Legislative and Political Affairs Bill Killmer said MBA strongly supports ethical and responsible lending and believes any enforcement regime should feature clear, well-defined rules, thresholds and remedies. Unfortunately, he noted, recent use of the False Claims Act and FIRREA has created greater uncertainty for FHA lenders, causing many lenders to pull back from the program.
“The legal and operational risks associated with originating FHA-insured loans have increased markedly in recent years, largely due to the prevalence of civil actions brought by the Department of Justice under the False Claims Act and [FIRREA], Killmer wrote. “The Fixing Housing Access Act of 2018 addresses this concern through a number of reasonable and thoughtful provisions.”
Killmer noted reforms contained in this legislation allow DOJ to retain “ample authority” to pursue bad actors and do not weaken the other administrative remedies that are available to HUD. “Instead, these reforms provide greater certainty to FHA lenders, enabling them to better serve the first-time and low-income homebuyers that are the central to the FHA mission,” the letter said. “As housing affordability remains a challenge in many segments of the country, common-sense steps to improve the FHA program, such as those contained in this legislation, are critically important.”
The bill currently awaits consideration by the House Financial Services Committee.
