WASHINGTON–Three organizations representing lenders told congressional leadership they oppose an amendment that would make changes to the False Claims Act (FCA) and that would harm the housing market and “frustrate efforts to work with the private sector to distribute COVID-related rental and homeowner assistance.”
The American Bankers Association, Housing Policy Council and Mortgage Bankers Association said they recognize the importance of the FCA in protecting taxpayers from fraud, waste and abuse at a time when the federal government is seeking to distribute trillions of dollars in much-needed COVID-related economic aid.
“However, the Amendment would make both substantive and retroactive changes to the FCA without benefit of congressional hearings, testimony or more rigorous legal analysis to determine its impact and likely unintended consequences,” the letter states. “In fact, the potential for unintended consequences from the Amendment is not hypothetical. The housing finance industry incurred billions of dollars of false claims liability over the last decade because the Federal Housing Administration (FHA) and Department of Justice over pursued lenders for minor errors on defaulted FHA insured loans that had no causal relationship to the reason for default. That experience forced many lenders to exit the FHA program, while other lenders responded to that risk by imposing sharply higher qualifying requirements on FHA borrowers.”
The result, the letter goes on to state, was a decade of reduced access and higher costs of FHA financing for first-time, low- to moderate-income, and minority homebuyers that the program is designed to serve.
‘Reverse’ Progress
“Only recently have changes to the FHA program certifications provided lenders with greater certainty and reduced the risk of draconian penalties they could be exposed to for immaterial data or documentation errors,” the organizations said. “However, just as those changes have begun to attract lenders back to the program and reduce the credit tightening that limited access to FHA-insured loans, the proposed Amendment, if enacted, would threaten to reverse that progress. The proposed Amendment’s impact could further slow desperately needed aid to COVID-impacted families and introduce new FCA litigation uncertainty into the mortgage market.”
The groups called for Congress to discontinue any further discussion around such an amendment.