Here is another example of a recent legal case involving a fraudulent real estate scheme, this time committed by a mortgage lender. I try to post case summaries in order to provide timely updates to real estate professionals on important issues.
On June 9, 2009, the United States Department of Justice ("DOJ") filed a lawsuit against California mortgage lender Capmark Finance Inc., charging that Capmark violated the federal False Claims Act by making false statements on applications for federal mortgage insurance covering residential nursing homes. The lawsuit relates to a federal program under which the United States Department of Housing and Urban Development (“HUD”) guarantees mortgage loans used to acquire healthcare facilities such as hospitals and nursing homes.
The lawsuit alleges that Capmark made false statements in HUD applications to guarantee mortgage loans made to acquire the Canoga Care Center, a residential nursing home facility in California, and the Hudson Valley Care Center, located in New York. After accepting Capmark’s applications for mortgage insurance, HUD was forced to pay $25,895,701.21 when both the Canoga Care Center and Hudson Valley Care Center defaulted on their loans. Pursuant to the False Claims Act, the DOJ is seeking treble (triple) damages and penalties.
The lawsuit is an allegation of unlawful conduct. The allegations must still be proven in federal court. I will try to follow this case and provide an update when the case is resolved.
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