Tuesday, May 17, 2011

HUD Audits Show Five Biggest Servicers Defrauded Taxpayers « naked capitalism

HUD Audits Show Five Biggest Servicers Defrauded Taxpayers « naked capitalism

From Shahien Nasiripour at Huffington Post:
A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans…

The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial…
The audits accuse the five major lenders of violating the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government. The audits were completed between February and March, the sources said. The internal watchdog office at HUD referred its findings to the Department of Justice, which must now decide whether to file charges…

The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.
Two of the firms, including Bank of America, refused to cooperate with the investigations, according to the sources. The audit on Bank of America finds that the company — the nation’s largest handler of home loans — failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October. Back then, the bank said it was resuming foreclosures, having satisfied itself that prior problems had been solved.
Yves here. This demonstrates that the banks have not cleaned up their bad practices despite promises to do so. And notice the “improper documents” issue got national attention, led several major servicers to halt foreclosures in multiple states and were put under the spotlight in a series of Congressional hearings. The banks piously claimed these were mere mistakes and they would fly straight. This exam shows them to have lied, pure and simple.
And Wells Fargo which has repeatedly and annoying claimed to be better than the other banks, is revealed to be worse, that its abuse can’t be pinned on low level employees or lax supervision of foreclosure mills:
….the Wells Fargo investigation concludes that senior managers at the firm, the fourth-largest American bank by assets, broke civil laws. HUD’s inspector general interviewed a pair of South Carolina public notaries who improperly signed off on foreclosure filings for Wells, the sources said.
Read the full article at Naked Capitalism

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