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OFF BEAT: Bank gets stung after foreclosing on insurance fraud investigator

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Lynn Szymoniak’s bank apparently had no idea with whom it was tangling when it moved to foreclose on her Florida home in 2008.

Ms. Szymoniak, in fact, had spent her career investigating insurance fraud—and used this experience to investigate banks in the mortgage lending business.

The upshot was that Ms. Szymoniak will be among six whistle-blowers who will pocket $46.5 million as part of a $25 billion national foreclosure settlement that state and federal officials reached with five banks, according to a news report.

Ms. Szymoniak’s attorney in two whistle-blower cases, Richard Harpootlian, said, “When they did this to her, they picked the wrong person at the wrong time in the wrong place. They stuck their hand into the beehive.”

According to the news report, Ms. Szymoniak’s subsequent examination, in which she relied on her experience as an insurance-fraud investigator, led to claims against banks for submitting fraudulent documents to the federal government in which they asserted they owned loans insured by the Federal Housing Administration, she said.

The national foreclosure settlement with the five banks resolves claims of abusive foreclosure practices, gives mortgage relief to borrowers, pays $1.5 billion to those who lost their homes to foreclosure, and sets standards for how the banks service mortgage loans.

Ms. Szymoniak, 63, said she stopped making mortgage payments in 2008, after a battle with cancer wiped out her savings and she cut back on work to care for her mother.

Ms. Szymoniak said she first was alerted to problems in the paperwork on her foreclosure when Deutsche Bank A.G. said it had acquired her mortgage note in October 2008, three months after the bank sued her over the loans.

She said, “I began doing what I’ve done for years—go out and investigate. It was pretty obvious to me that the paperwork was fraudulent.”

Ms. Szymoniak said she’s unsure what she’ll do with her $18 million award. Meanwhile, Deutsche Bank is proceeding with its foreclosure action against her home, said Ms. Szymoniak.