WASHINGTON Sen. Elizabeth Warren, D-Mass., is pressuring the Department of Justice for more details related to payments made to the Federal Housing Administration as part of the $25 billion mortgage servicing settlement announced last year.
Servicers agreed to pay $225 million under the settlement to obtain releases from False Claims Act liability stemming from fraudulent mortgage insurance claims made to the FHA and other agencies between 2008 and 2010, which Warren argues is just 0.6% of their potential liability under the law. The deal is part of a larger settlement announced in March 2012 between five of the nation's largest mortgage servicers, 49 state attorneys general and federal officials.
"I am concerned that this might be yet another example of the federal government's timid enforcement strategy against the nation's largest financial institutions," Warren wrote in an Aug. 21 letter to U.S. Attorney General Eric Holder. "Settlements are important and play a necessary role in any enforcement regime, but it is critical that the government take steps to maximize its leverage and avoid settling on the cheap. Rushed and inadequate settlements fail to fully compensate victims and taxpayers and insufficiently deter future misconduct."
In the letter she requested details, including any analysis or documentation, of how DOJ and others came to the $225 million figure for resolving False Claims Act liabilities. She also asked for an estimate of how much of that payment has been deposited into the FHA's capital reserve fund and how much is expected to be deposited by the servicers when they complete their payments.
"Although this settlement took place more than a year ago, the FHA has still not gained its financial footing, and I believe these questions are important ones for members of Congress and taxpayers," Warren added.
The Massachusetts Democrat said she hopes for answers to her query by the end of September.