Newspaper article St Louis Post-Dispatch (MO)

Lender Pays $7 Million in Hud Scam

Newspaper article St Louis Post-Dispatch (MO)

Lender Pays $7 Million in Hud Scam

Article excerpt

One of the nation's biggest home lenders agreed Thursday to pay $7 million to settle a suit that accused it of ripping off taxpayers through a mortgage insurance scam on 43 properties in Overland and south St. Louis.

The settlement will be paid by First Union Mortgage Corp. of Raleigh, N.C. It's the largest ever in a case brought under the False Claims Act involving the Department of Housing and Urban Development's single family mortgage insurance program, the Justice Department said.

Federal authorities alleged in a suit filed here in 1994 that First Union helped Kansas City real-estate promoter Richard Powelson defraud HUD. Powelson filed for personal bankruptcy in 1990 and isn't part of the government's suit against First Union.

First Union is the mortgage lending arm of First Union Corp., a $72 billion bank based in Charlotte, N.C. As part of the settlement, HUD agreed not to bar First Union from HUD mortgage-insurance programs.

The government's suit was filed by the Justice Department in Washington and the U. …

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