United States District Court, E.D. Kentucky, Central Division, Lexington
UNITED STATES OF AMERICA, ex rel. Ramon Maldonado, Plaintiffs,
BALL HOMES, LLC, et al., Defendants.
MEMORANDUM OPINION AND ORDER
C. REEVES UNITED STATES DISTRICT JUDGE.
Ramon Maldonado filed a qui tam action under the
False Claims Act against Defendants Ball Homes, LLC,
(“Ball Homes”), Walden Mortgage Group, LLC,
(“Walden”), American Mortgage Service Company,
(“American Mortgage”) and John Does 1-10, on
September 19, 2017. [Record No. 1] Maldonado alleges that the
defendants took part in a fraudulent scheme which involved
submitting falsified documents to obtain loans insured by the
Federal Housing Administration (“FHA”).
United States filed a notice of its election to decline
intervention on February 15, 2018. [Record No. 8] The
Complaint was unsealed and the Relator was permitted to serve
the Complaint upon the defendants. After Maldonado served the
defendants, the United States and the defendants filed
separate motions to dismiss. [Record Nos. 23, 20, 26]. The
Court scheduled the matter for oral argument and Maldonado
subsequently moved for an evidentiary hearing. [Record No.
38] The Court heard the parties' arguments on June 29,
reasons that follow, Maldonado's motion for an
evidentiary hearing will be denied, the United States'
motion to dismiss will be granted, and the defendants'
motions to dismiss will be denied, as moot.
United States Department of Housing and Urban Development
(“HUD”) administers a home-loan program through
the FHA. Under this program, the FHA insures mortgage loans
made by private lenders that have been approved by the
FHA.[1" name="FN1" id="FN1">1]
[Record No. 1, ¶ 10] If a homeowner defaults on his
FHA-insured loan and the lender forecloses, HUD pays the
lender the balance of the loan and assumes ownership and
possession of the property. Id. at ¶ 11. The
program requires the lender to make a determination that the
property and borrower are eligible for mortgage insurance
according to HUD's requirements. Id. ¶ 18.
Form 92541, “Builder's Certification of Plans,
Specifications, & Site” is at issue in this case.
It includes various questions pertaining to whether the
property in question meets minimum standards required for FHA
insurability. See 24 C.F.R. § 200.926. This
form is submitted to the lender, as well as an appraiser, and
must be completed before a borrower may be approved for an
FHA loan. [Record No. 1, ¶ 22]
alleges that he purchased a new-construction home from
Defendant Ball Homes in March 2013. The home is located at
4736 Foxglove Point in Lexington, Kentucky, and is part of
the “Chilesburg development.” [Record No. 1,
¶ 44] The contract between Maldonado and Ball Homes made
the purchase contingent upon Maldonado obtaining an
FHA-insured loan. Id. at ¶ 47. Maldonado
alleges that Ball Homes' closing agent, Kay Conley,
completed HUD Form 92541 (the “Form”), and
certified that that the home met the requirements of
“24 C.F.R. 200.936(d).” Id. at ¶
contends that portions of the certification were false,
including part 1(f), which certified that the home site
“did not have any earth fill.” Id. at
¶ 52. Maldonado also claims that Conley falsely
certified that she had personally reviewed the “plans,
specifications, and site information, ” when, in fact,
she lacked the personal information necessary to complete the
Form. Id. at ¶ 54.
alleges that Ball Homes submitted the falsified Form to
Walden, a third-party originator for FHA loans, knowing that
Walden would submit the Form to a loan underwriter to secure
an FHA loan. Id. at ¶ 57-58. Indeed, American
Mortgage underwrote the loan and, according to Maldonado,
collected underwriting fees, as well as principal and
interest payments. Id. at ¶ 60. He further
contends that Walden collected a closing fee in excess of $4,
000.00, with knowledge of the falsified Form. Maldonado
claims that, “on information and belief, ” Walden
had knowledge of falsified HUD 92541 forms for other homes in
the Chilesburg development. Id. at ¶ 63.
contends that numerous people acted in reliance on the
allegedly falsified Form. First, he claims that he
was forced to rely on the false builder's certification
to be able purchase the home. Id. at ¶ 63. He
further contends that the FHA appraiser relied on the Form to
complete the required appraisal of the home. Id. at
¶ 65. Finally, he alleges that the FHA relied on the
falsified Form, submitted by Walden, on behalf of American
Mortgage, when it approved the home for FHA mortgage
insurance. Id. at ¶ 66.
claims that his home is defective for a variety of reasons,
including “settling soils, water problems, and other
construction related issues.” Id. at ¶
67. He alleges that, “based on information and belief,
” Ball Homes and Walden have utilized “this same
scheme” to obtain FHA-insured loans throughout
Lexington, Kentucky, and perhaps in other states.
Id. at ¶ 68. He contends that the FHA has paid
approximately $11, 715, 000.00 based on 132 home foreclosures
for new construction homes built by Ball Homes and believed
to be financed through Walden Mortgage. Id. at
alleges that Ball Homes and Walden violated the False Claims
Act (“FCA”), 31 U.S.C. § 3729 et
seq., by knowingly submitting falsified 92541 forms for
FHA insurance. He further claims that American Mortgage
and John Does 1 through 10 violated the FCA by failing to
properly monitor Walden, “as required by the HUD Single
Family Handbook.” Id. at ¶¶ 107,
109. Maldonado voluntarily dismisses Count 5
(“Violation 18 U.S.C. §§ 1001, 1010, 1012; 31
U.S.C. §§ 3729, 3802 as provided on HUD ...