Prospect Mortgage of Sherman Oaks, CA, this week joined a growing list of FHA lenders that have opted to settle federal false claims allegations arising from flawed underwriting and poor quality control. Prosecutors with the U.S. Attorneys Offices for the Northern Districts of Georgia and California announced a $4.16 million settlement with Prospect stemming from alleged fraudulent FHA lending practices at two of its Southeastern branches. An FHA direct endorsement lender, Prospect’s branches in Florida and North Carolina allegedly violated the False Claims Act by falsely certifying compliance with FHA underwriting and quality control requirements. Consequently, the FHA suffered substantial losses in claim payments when the loans defaulted. HUD’s Atlanta Home Ownership Center reported that Prospect had a 12.29 percent default rate, well in excess of the national average, between December 2007 and ...