Cambridge Home Capital, LLC ("Cambridge"), Seth Kramer and Craig Hyman, two principals of the lender; Seth Lapidus and Jacqueline Derrell, two former managers at the company; and Cambridge Funding Group, LTD., an affiliated business, have settled a civil lawsuit concerning claims of mortgage fraud.

In December 2010, the Government filed a civil fraud lawsuit alleging that these six defendants ("the Cambridge defendants"), and others, participated in a mortgage fraud conspiracy involving 17 properties whose buyers obtained HUD-backed loans upon which they subsequently defaulted.  As part of the settlement, the Cambridge defendants agreed to pay $1.2 million in damages and civil penalties, which is three times the profit the Government alleges the Cambridge defendants earned from the bad loans. 

In addition, the Cambridge defendants admitted that, for certain of the bad loans, they (i) submitted records to the U.S. Department of Housing and Urban Development ("HUD") that overstated the borrowers' incomes and/or understated their liabilities; (ii) submitted certifications to HUD stating that Cambridge had satisfied its duties as a direct endorsement lender, when in fact it had not; and (iii) made payments to creditors of borrowers to pay off their personal debts.  In addition, Kramer and Hyman agreed to be barred permanently from all HUD programs. 

The settlement was approved in Manhattan federal court by U.S. District Judge P. Kevin Castel.

Preet Bharara, the United States Attorney for the Southern District of New York, announced the settlement.