A New Jersey mortgage lender with operations in Edina has agreed to pay more than $74 million to settle a lawsuit and a U.S. Department of Justice investigation into defective home loans.

A pair of settlements, reached in Minnesota and New York, stem from an investigation by the U.S. attorney's office in Minnesota and a lawsuit filed in New York by a former employee who turned whistleblower and alleged years of faulty lending practices.

PHH Corp., whose PHH Home Loans business operates in Edina, has agreed to pay $65 million to resolve alleged Federal Housing Administration (FHA) violations and another $9.45 million to resolve allegations that it sent the U.S. Department of Veterans Affairs defective loans that were purchased by government mortgage programs.

The settlement also will pay out more than $9 million to the former PHH employee who sued the company in 2013, the U.S. attorney's office announced Tuesday.

PHH agreed to resolve False Claims Act violations that it originated and underwrote mortgage loans that the company knew failed to meet applicable requirements, incurring heavy costs for taxpayers and homeowners, according to Gregory Brooker, acting U.S. attorney in Minnesota.

"This significant resolution helps rectify the misconduct by returning more than $74 million in wrongfully claimed funds to the government," Brooker said in a statement released Tuesday.

The company said in a statement that it agreed to resolve the case, without admitting liability, "in order to avoid the distraction and expense of potential litigation."

"While we cooperated fully in these investigations since receiving subpoenas in 2013, we concluded that settling these matters is in the best interest of PHH and its constituents," the company said. "Adhering to high legal, regulatory and ethical standards is at the core of how we conduct business ..."

Chad Readler, an acting assistant attorney who leads the Justice Department's Civil Division, said government mortgage programs must count on lenders to approve only eligible loans.

The settlement covered actions from 2006 through 2011, a period when PHH admitted to failing to comply with U.S. Department of Housing and Urban Development (HUD) underwriting requirements and self-reporting requirements imposed by the FHA.

PHH failed to document borrowers' creditworthiness — such as recent pay stubs or housing payment histories — and failed to disclose details that would have led borrowers to exceed HUD's debt-to-income ratio requirements for FHA-insured loans, according to the settlement.

A 2007 audit of a targeted sample of government-backed loans revealed that fewer than half accurately provided information for "closing or pre-insuring requirements."

An unnamed executive is cited in the settlement agreement as calling the rate of defective loans "shocking" in 2013.

HUD "subsequently incurred substantial losses" when it paid insurance claims on loans endorsed by PHH, according to the settlement.

PHH also issued Veterans Affairs home loans and sold loans to the Freddie Mac and Fannie Mae mortgage programs that failed to comply with their respective requirements, the government said.

Stephen Montemayor • 612-673-1755

Twitter: @smontemayor