One of the largest private mortgage lenders in the US, Allied Home Mortgage, is being sued for billions in damages after US prosecutors alleged it had engaged in reckless lending practices.
Also named in the lawsuit, which was filed by the US Attorney’s Office in Manhattan, is the founder of Allied, James Hodge, who is accused of creating a “culture of corruption” within the company. It is alleged that he filed false quality control reports and set up ‘shadow’ branches outside of the scrutiny of state regulators.
What’s more, Hodge is also accused of gaining gained entry into the insurance programme by hiding the felony convictions of his employees as well as sanctions made against Allied from state regulators. It is claimed that between 2001 and 2010 more than $834 million was paid out by the federal insurance programme on defaulted mortgages which Allied underwrote.
Prosecutors are seeking a total of $2.5 billion in damages, meaning that Allied Home Mortgage will need to rely heavily on its professional indemnity insurance if it loses the case. The company, nor Mr Hodge, have commented on the lawsuit so far.