A decade-long scheme of systemic fraud by Houston-based Allied Home Mortgage Capital Corp. cost taxpayers $834 million in insurance claims on defaulted loans and forced thousands of the company’s customers to lose their homes through mortgages that were “doomed to fail,” according to a lawsuit filed by a former branch manager of the company and which the U.S. government officially joined yesterday. Allied Home, which is based in offices at 6110 Pinemont Dr. (above) off the Northwest Fwy. not far from Houston’s new FBI HQ, claims to be the largest privately held mortgage company in the country (99 percent of the company is owned by founder Jim Hodge), with 200 branches, down from a high of 600. Separately, the company has now been suspended from issuing any FHA-backed loans or GNMA-backed mortgage securities.
Part of Allied Home’s notable lending record: Almost one third of the 112,324 FHA-backed loans it originated between 2001 and 2010 defaulted, according to the lawsuit. In 2006 and 2007, the government claims, the default rate reached 55 percent. The U.S. Dept. of Housing and Urban Development could face up to $363 million more in insurance claims from Allied Home’s 2,509 loans currently in default.
Included in the company’s bag of tricks, according to prosecutors: fraudulent paperwork and a network of “shadow” branches which claimed to be HUD-approved but were not. Branches with high default rates would apply for new HUD ID codes under tweaked addresses or under the name of a sister company — Allied Home Mortgage Corp. — in an attempt to deceive regulators, according to the filing. “If and when we have sufficient evidence for a criminal case, we’ll bring it,” U.S. Attorney Preet Bharara announced at a press conference yesterday.
- Feds File Massive Fraud Case Against Allied Home Mortgage, Texas Mortgage Firm Survives and Thrives Despite Repeat Sanctions, Timeline: Allied’s Trail of Sanctions, and Head of Allied Home Mortgage Has Had a Bumpy Journey [ProPublica]
- Allied Lawsuit
- HUD Suspends Allied Home Mortgage Corp. and CEO [HUD]
- Allied Home Mortgage Is Sued Over Bad Loans [NY Times]
Photo: Merchant Circle