September 4, 2015 / 7:52 PM / 2 years ago

UPDATE 1-Walter to pay $29.63 mln in U.S. reverse mortgage settlement

(Adds allegations, whistleblower, case citation, stock price, byline)

By Jonathan Stempel

Sept 4 (Reuters) - Walter Investment Management Corp agreed to pay $29.63 million to resolve allegations that it submitted false claims related to a U.S. Department of Housing and Urban Development program that insures reverse mortgages.

The settlement announced on Friday by the U.S. Department of Justice resolved claims that Walter violated the federal False Claims Act through its servicing of mortgages insured under HUD’s Home Equity Conversion Mortgages program.

The government alleged that Walter’s Reverse Mortgage Solutions Inc unit from August 2009 to March 2015 submitted claims for interest payments to which it was not entitled.

It also alleged that Walter units from July 2010 to October 2014 submitted false claims to HUD for the reimbursement of unlawful referral fees by falsely representing them as lawful sales commissions, including through the use of straw companies to liquidate foreclosed properties.

Reverse mortgages let homeowners, typically the elderly, borrow against the equity in their homes, with no repayments required until the borrowers die or the homes are sold.

The HUD program offers reimbursements for reverse mortgages that are not fully repaid, provided that the servicers meet various regulatory requirements and deadlines.

Walter did not immediately respond to requests for comment. In an Aug. 10 regulatory filing, the Tampa, Florida-based company said it expected a settlement would not include an admission or finding of liability.

The False Claims Act lets whistleblowers sue on the government’s behalf, and share in recoveries.

Walter’s settlement resolves allegations first made in a 2013 lawsuit by Matthew McDonald, a former Reverse Mortgage Solutions executive from Florida. He will receive $5.15 million from the settlement, the Justice Department said.

Walter shares were up 6 cents at $15.41 shortly before the market close.

The case is U.S. ex rel. McDonald et al v. Walter Investment Management Corp et al, U.S. District Court, Middle District of Florida, No. 13-01705. (Reporting by Jonathan Stempel in New York; Editing by Chris Reese and Richard Chang)

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