Government wins $92 million in mortgage fraud insurance case

A federal jury in Houston awarded the U.S. government $92 million in civil damages after finding two mortgage companies and one of its executives responsible for more than a decade of mortgage insurance fraud.

The initial case against Allied Home Mortgage Capital and Allied Home Mortgage Corp. along with president and chief executive Jim C. Hodge was filed in New York in 2011 as a whistleblower claim. That same year, the federal government intervened in the case. In 2012, the case was moved to Houston where a similar case was pending.

Houston lawyer Wendell Odom, who represents Allied and Hodge, said he was disappointed with the verdict and vowed to appeal. The case stems from the federal government’s effort to collect damages from mortgage lenders after the financial meltdown of the markets in 2008 and 2009. Unscrupulous and risky mortgage lending in the previous decade is widely viewed as contributing to the housing bust that spilled into Wall Street and spurred the financial crisis.

“By using technical violations of federal regulations, the government sued us for market conditions the government encouraged and then assessed damages for loans that Allied did not cause to go into default,” Odom said in a written statement.

Odom also noted that the jury decision was not unanimous. There was a holdout juror who was disqualified because he would not continue to deliberate after making up his mind for the defense.