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Over the past few years, many of the nation's biggest financial institutions have distanced themselves from Federal Housing Adminstration credit, frightened by the government's increasing use of the False Claims Act to make huge comparisons with FHA lenders. However, it seems that all this will be changed as FHA commissioner Brian Montgomery said Tuesday that he believed the Obama administration had gone too far in some cases and said the Trump Administration is withdrawing use of the False Claims Act to get more lenders back into FHA lend.
"Bank-of-America, [JPMorgan] Chase and others hardly sell the FHA now. Montgomery said the trump management wants to alter that and get more security around FHA Lending back into the mortgages business. Mr Montgomery noted talks between the Department of Housing and Urban Affairs and the Department of Justice about changes to the use of the False Claims Act, which preceded his return to the FHA last month, and said that FHA loan recovery could be resumed under the FHA roof.
Montgomery says the Obama government may have exerted a little too much pressure in certain situations. During the Obama Administration, the False Claims Act, which was used as a weapons against FHA lenders, rose to prominence, with the DOJ alleging a number of lenders infringing the False Claims Act by deliberately issuing and writing loans that did not comply with FHA industry norms.
Lenders of various size, under the Obama Administration, some of the biggest in the country, among them, consented to disburse millions of US dollar in settlement payments under the auspices of the False Claims Act. This effort altered the teint of FHA loans, with custodians like JPMorgan Chase pulling away, and non-banks like Quicken Loans closing the loopholes.
JPMorgan Chase CEO Jamie Dimon quoted the False Claims Act last year as the cause of the bank's withdrawal from FHA credit. Mr Dimon said earlier that the bank dramatically reduced its FTA loans in 2015, partly due to the threat of a False Claims Act fee from the state.
He also said that these comparisons of the False Claims Act "have destroyed the FHA's viability for a decade. However, the FHA's ability to make a profit has been undermined. "FHA kidnapped by Justice Department" by applying the False Claims Act. On the other side, the Trump Board seems to have a distinctly different perspective on the False Claims Act, with HUD Secretary Ben Carson repeating that HUD is working with the DOJ to limit or end the use of the False Claims Act against FHA lenders.
And, according to Montgomery, greater assurance about the FHA's credit policy, combined with a reduced risk of a government-drawn agreement, will lead more lenders back to the FHAs.