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We assisted the U.S. Attorney’s Office of the Northern District of California in the civil investigation of Reunion Mortgage, Inc. (Reunion).  Reunion is a former Federal Housing Administration (FHA)-approved mortgage lender, with its principal place of business located in Milpitas, CA.  Based in large part on our review of loans underwritten by Reunion between December 2007 through October 2009, the U.S. Attorney’s Office filed a civil complaint against Reunion under the False Claims Act, multiple common law theories, and the Federal Debt Collection Procedures Act.  The initial complaint alleged that Reunion engaged in reckless underwriting of certain loans and falsely certified to FHA that those certain loans met HUD’s requirements and were eligible for FHA insurance when they were not actually eligible.  Further, that FHA relied on Reunion’s certifications when insuring the loans, and as the borrowers on those loans defaulted, FHA incurred losses that it should not have incurred.  The U.S. Attorney’s Office subsequently amended its complaint and further alleged that Reunion improperly issued dividends to its former co-owners that rendered the company insolvent and unable to pay its debts to the United States, in violation of the Federal Debt Collections Procedures Act.

On May 16, 2014, Reunion and its former co-owners entered into a settlement agreement to pay $1.04 million to settle allegations that the company submitted false claims to FHA in violation of the False Claims Act, multiple common law theories, and the Federal Debt Collection Procedures Act.  The parties to the settlement agreement entered into the agreement to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the alleged claims.  The parties also agreed the settlement was neither an admission of liability by Reunion or its former co-owners, nor a concession by the United States that its claims were not well founded.