A New York mortgage company has been sued by the U.S. Department of Justice (DOJ) for alleged fraud against the Federal Housing Administration (FHA)Golden First Mortgage Corporation and its president David Movtady are accused of having "repeatedly lied" to the government between 2002 and 2010 to win FHA insurance for its loans.  These loans were, the suit alleges, of poor quality and ultimately cost taxpayers millions of dollars.

FHA does not review home loans before approving them, relying on its lenders to underwrite them in accordance with government guidelines to ensure their creditworthiness.  Golden First is said to have submitted false certifications that it had conducted proper due diligence.  Instead the Great Neck Long Island company emphasized speed and volume over quality and offered kickbacks to its employees to ramp up production.  Supposedly three employees closed 100 to 200 loans each month which would make proper underwriting virtually impossible. 

The company had a default rate that topped 60 percent on $707 million in loans made during the subject period and the FHA has paid more than $12.3 million in insurance claims on Golden First loans since July 2007. The suit, brought under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) which has a ten year statute of limitations, and the False Claims Act seeks triple damages, fines, and compensatory damages.

"Golden First and David Movtady churned out bad loans and lied about their compliance with HUD requirements, leaving taxpayers on the hook for millions of dollars when the loans inevitably defaulted," U.S. Attorney Preet Bharara in Manhattan said in a statement.