IberiaBank to pay $11.6 Million for false funding claims

IberiaBank to pay $11.6 Million for false funding claims

SOUTHWEST LOUISIANA (KPLC) - IBERIABANK Corporation, IBERIABANK, and IBERIABANK Mortgage Company, based out of Lafayette, Louisiana, have agreed to pay a large settlement of $11.6 million for allegedly violating the False Claims Act.

According to The U.S. Justice Department, IBERIABANK falsely certified it was complying with the requirements for mortgage insurance on Federal Housing Administration loans.

IBERIABANK was a certified direct endorsement lender in the FHA program from Jan. 1, 2005, to Dec. 31, 2014. A direct endorsement lender has the authority to originate, underwrite, endorse and approve mortgages for FHA insurance without review for loan compliance with the federal requirements.

These special lenders are required to follow strict program rules to make sure they are properly underwriting and certifying mortgages for FHA insurance.

As part of the settlement, IBERIABANK admitted to the following facts:

  • Between Jan. 1, 2005, and Dec. 31, 2014, IBERIABANK certified FHA insurance mortgage loans that did not meet HUD underwriting requirements
  • IBERIABANK’s loan files contained inadequate documentation of the borrower’s income
  • There were unresolved appraisal discrepancies concerning declining home values
  • Some loans had inadequate verification related to the borrower’s down payment.
  • IBERIABANK paid incentive payments to underwriters and others who performed underwriting activities
  • After a 2010 HUD review of IBERIABANK, the bank said it was not paying underwriter commissions but did not disclose that the bank was still paying incentive payments
  • IBERIABANK did not timely self-report material violations of HUD requirements

The allegations against IBERIABANK were filed in a lawsuit by two former IBERIABANK employees. The lawsuit was filed under the False Claims Act, which allows private parties to sue on behalf of the government and share any recovery.

The whistleblowers will receive a 20 percent share of the settlement. The settlement was the result of a joint investigation conducted by HUD, HUD's Office of Inspector General, the Civil Division and the U.S. Attorney's Office.

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