By Bob Van Voris and Patricia Hurtado, Bloomberg News, November 1, 2011

Allied Home Mortgage Capital Corp., which last year claimed to be the biggest closely held mortgage broker in the U.S., was sued by federal authorities for alleged fraudulent lending practices.

....The government claims one-third of the 112,324 loans originated by Allied from 2001 to through 2010 defaulted, forcing the U.S. Department of Housing and Urban Development to pay $834 million in insurance claims, according to a complaint filed in federal court in Manhattan today.

“Allied has profited for years as one of the nation’s largest FHA lenders by engaging in reckless mortgage lending, flouting the requirements of the FHA mortgage insurance program, and repeatedly lying about its compliance,” the U.S. said in the complaint. “In the past decade, Allied has originated loans out of hundreds of branches it never disclosed to HUD.”

The government, represented by the office of U.S. Attorney Preet Bharara in Manhattan, claims Hodge created a “culture of corruption” and used offshore compliance employees who didn’t even know what mortgages were. The U.S. is seeking triple damages from Allied under the federal False Claims Act.....