Ninth Circuit Ruling Heightens FCA Risks for Mortgage Lenders
The Ninth Circuit clarified key triggers for False Claims Act liability and attorney fee awards in mortgage cases.
Why it matters: Mortgage lenders and servicers face heightened exposure to FCA lawsuits, even without government intervention. Legal departments must strengthen compliance oversight to avoid costly settlements and extended litigation over fees.
- The Ninth Circuit upheld a $38.5 million settlement in a whistleblower FCA case against Academy Mortgage.
- Postjudgment interest on attorneys' fees starts from the award date, not the original settlement date.
- The court reversed a 1.75 multiplier on attorneys’ fees, citing insufficient rationale for the enhancement.
- Lenders can face significant financial liability from private litigants under the FCA.
The Ninth Circuit's April 6, 2026, opinions in United States ex rel. Thrower v. Academy Mortgage Corporation serve as a cautionary tale for mortgage lenders navigating False Claims Act (FCA) risks. The case stemmed from a qui tam action brought by former underwriter Gwen Thrower, alleging false certifications in federal mortgage insurance programs. Despite the government declining to intervene, Thrower's litigation resulted in a landmark $38.5 million settlement—nearly $27 million of which went to the U.S. Treasury.
- The rulings clarify that postjudgment interest under 28 U.S.C. § 1961(a) starts accruing only when a definite, ascertainable money judgment is entered—not when a settlement is approved. As summed by Judge Patrick J. Bumatay: "Interest is allowed on 'any money judgment' and 'shall be calculated' from 'the date of the entry of the judgment.'"
- In a separate appeal, the Ninth Circuit reversed the district court's 1.75 multiplier on attorneys' fees, finding "the factors cited for the enhancement were already reflected in the lodestar calculation." This led to a reduction in Thrower’s over $8.5 million fee award, though she retained approximately $89,000 in expenses granted in May 2024.
These decisions signal that FCA exposure can materialize from private litigants—regardless of the government's stance—and prompt reevaluation of legal, risk, and compliance strategies in federally insured mortgage practices. The financial repercussions span settlements, fee disputes, and potential precedent for future FCA matters in the financial services sector.
By the numbers:
- $38.5 million — Total FCA settlement amount in January 2023
- $8.5 million+ — Attorneys' fees awarded in May 2024 (later reduced)
- 1.75 — Fee multiplier on lodestar reversed by the Ninth Circuit
Yes, but: The government's decision not to intervene or pursue the case did not shield Academy Mortgage from significant liability.