We regularly report on the effects of mortgage fraud, including several high-profile cases between the Office of Housing and Urban Development (HUD) and several large banking institutions. Mortgage fraud can occur in any number of ways, including false assertions by lenders that borrowers should qualify for mortgage insurance or failing to abide by underwriting standards when approving applicants for loans. Regardless of the type of misconduct, mortgage fraud often leads to borrower default, foreclosure, and massive payouts pursuant to mortgage insurance policies that should never have been executed in the first place.
In keeping with our dedication to advocacy against this type of fraud, which is often brought to light through private whistleblower complaints, we will spend the next two posts reviewing a recent audit of the Department of Justice’s efforts to combat mortgage fraud, including seven suggestions offered by the Office of Inspector General to combat these practices for good and protect not only taxpayer funds, but individual Americans from another housing crisis akin to that of 2008.
Prioritization of Mortgage Fraud
The OIG began its audit by pointing out that, despite the DOJ’s outward assertion that mortgage fraud is a high prosecution priority, the data does not demonstrate a true dedication to eliminating this type of crime. Specifically, the OIG points out that the FBI’s criminal investigative team ranked mortgage fraud as its lowest-priority crime within its lowest-level criminal category. Several FBI field offices were also visited in a number of large cities across the U.S., many of which indicated that mortgage fraud was not a priority at all. Likewise, Assistant U.S. Attorneys reiterated that they did not have adequate data to offer about the prosecution of mortgage fraud, as these types of crimes are usually misreported or misclassified. However, the attorneys interviewed believed this to be caused by the fact that mortgage crimes are often bundled with several other complex financial crimes comprising a financial crimes case.
Problems with the Mortgage Fraud Task Force
The OIG isolated several problems within the DOJ’s mortgage fraud division, many of which pertained to record and data organization. However, several issues involve problems with the methods in which the DOJ presents and provides public access to information for distressed homeowners.
The Distressed Homeowner Initiative was launched in the wake of the 2008 housing bubble bursting to increase investigation and prosecution of those committing acts of mortgage fraud against homeowners and the federal government. According to the OIG’s reports, the DOJ inflated or misrepresented certain figures with regard to the Initiative and several draft press releases were found to have inaccurate information about mortgage fraud cases settled with the DOJ. As a result, the OIG isolated this as a major issue for the DOJ to address moving forward, recommending it revisit and review all data before publishing it to the press. It further requested the DOJ implement this review policy with any other mortgage fraud-related news to be shared with the public as homeowners rely on this information to be an accurate measure of the DOJ’s effectiveness.
Suspect Mortgage Fraud? Contact an Experienced Whistleblower Attorney Today
Mortgage fraud continues to plague American homeowners. In the OIG’s report, it highlights that while underwriting-related fraud has waned since 2008 thanks to tighter federal and state controls, other types of fraud have appeared, including foreclosure rescue scams, modification fraud, or short-sale rip-offs. If you are aware of mortgage fraud, you may be able to file a whistleblower complaint against your lender or financial institution. Chances are good you are not the only homeowner facing difficulty and we encourage you to contact Berger Montague today.