False Claims Act
Calderon v. Carrington Mortgage Services LLC
Date: June 14, 2023

Issue: Whether relators must show proof that false statements were the proximate cause of any eventual default to recover under the False Claims Act (FCA).

Case Summary: In a 3-0 decision, a Seventh Circuit panel ruled an FCA relator alleging false certifications for FHA insurance coverage must prove the false statement caused or increased the risk of a subsequent default.

Relator Michelle Calderon alleged Carrington Mortgage Services made false statements to the U.S. Department of Housing and Urban Development (HUD). According to Calderon, Carrington’s statements misrepresented borrowers’ risk levels when submitting applications to have loans covered by federal mortgage insurance. Federal mortgage insurance from the Federal Housing Administration (FHA) allows those considered too risky to apply for traditional mortgage by covering the losses for lenders if the borrower defaulted on the loan. Calderon claimed Carrington provided false information or omitted certain information, which would have made HUD consider these loans too risky or ineligible for federal mortgage insurance. Calderon sued alleging Carrington violated the FCA.

The district court granted summary judgment for Carrington. The court determined Calderon could not prove the alleged misrepresentations caused a monetary loss. The court emphasized a plaintiff must show actual and proximate cause to recover under the FCA. The...

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