Consultants Explore Analyses Used in Mortgage-Based False Claims Act Matters, in
October 2, 2012
The False Claims Act (FCA), often associated with matters involving the off-label marketing of pharmaceuticals and medical devices, increasingly is being invoked in matters involving financial institutions -- and, in particular, in disputes involving the U.S. Federal Housing Administration's mortgage insurance program.
In the Law360 article "Tools for Handling Mortgage-Based FCA Claims," (September 26, 2012), Managing Principal Rebecca Kirk Fair and Vice President David Mishol explore this trend and outline the types of analyses economic experts can perform to help estimate damages and formulate effective defense strategies.
FCA-related cases involving financial institutions have mainly centered on allegations that specific facts about mortgage loans were misrepresented in the loan documents, or that the loans were subject to inflated appraisals, the authors explain. In such cases, there are four relevant analytical approaches experts can use:
- an assessment of the actual rate of misrepresentation and its effect on lending, through re-underwriting of the loans at issue (based on contemporaneous underwriting guidelines);
- an assessment of the materiality of the alleged fraud to FHA's provision of insurance;
- the development of a but-for scenario that considers loans the government would have insured in lieu of the alleged fraudulent loans; and
- an assessment of the extent of corporate gain.
"These approaches can be employed using a combination of simple descriptive methods and more sophisticated statistical modeling techniques -- tools that make it possible to isolate and estimate the amount of insurance payments that were made by the government due to the alleged fraud," the authors say.