DOJ investigating PrimeLending for FHA loan violations

False Claims Act violations on FHA-insured loans at heart of investigation

Dallas-based PrimeLending is the subject of a U.S. Department of Justice investigation into whether the lender violated the False Claims Act on loans insured by the Federal Housing Administration.

The investigation was disclosed in the quarterly Securities and Exchange Commission filing of Hilltop Holdings (HTH), which is parent company of PrimeLending.

In the SEC filing, Hilltop Holdings said that PrimeLending received a subpoena from the Office of Inspector General of the U.S. Department of Housing and Urban Development as part of an “industry-wide inquiry” regarding mortgage-related practices, including those relating to PrimeLending’s origination practices for loans insured by the FHA.

Hilltop goes on to disclose that on Aug. 20, PrimeLending received “Civil Investigative Demand” from the DOJ related to the subpoena from the HUD-OIG.

“According to the Civil Investigative Demand, the DOJ is conducting an investigation to determine whether PrimeLending has violated the False Claims Act in connection with originating and underwriting single-family residential mortgage loans insured by the FHA,” Hilltop said in the SEC filing.

Hilltop said that PrimeLending is cooperating with the DOJ investigation and continues to respond to the Civil Investigative Demand.

“While the final outcome of litigation and claims exposures or of any inquiries is inherently unpredictable, management is currently of the opinion that the outcome of pending and threatened litigation and Inquiries will not have a material effect on the company’s business, consolidated financial position, results of operations or cash flows as a whole,” Hilltop said in the SEC filing.

“However, in the event of unexpected future developments, it is reasonably possible that an adverse outcome in any of the matters discussed above could be material to the company’s business, consolidated financial position, results of operations or cash flows for any particular reporting period of occurrence.”

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