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Feds put out False Stats on Mortgage Fraud

mcall.com | March 23, 2014

By Paul Muschick

In front of news cameras, federal authorities have talked tough about combating mortgage fraud.

But behind closed doors, some FBI offices didn't even list mortgage fraud as a top priority, and the Department of Justice repeatedly promoted inflated statistics about one crackdown, says a recent audit that challenges the government's fraud-fighting claims.

The inspector general for the Department of Justice examined probes into fraud such as borrowers' or industry insiders' falsifying data on home mortgage applications. Auditors also studied efforts to combat fraud against distressed homeowners, such as the foreclosure rescue scams I've written about where con artists take money from people and promise to modify their mortgages but don't.

Auditors found the FBI's criminal investigative division "ranked mortgage fraud as the lowest-ranked criminal threat in its lowest crime category." Some FBI field offices didn't list it as a priority at all, and the number of agents investigating mortgage fraud and the number of pending investigations decreased from 2009 to 2011, the peak of the foreclosure crisis, according to the report released a few weeks ago.

Then there was the statistical showboating Oct. 9, 2012. The Financial Fraud Enforcement Task Force, led by the Department of Justice, held a news conference that day to announce its "Distressed Homeowner Initiative." Officials boasted of criminal charges against 530 people and fraud that cost homeowners more than $1 billion within the past year.

Those statistics were a fraud.

A review of the numbers shortly after the news conference revealed "numerous significant errors and inaccuracies" in the data, the inspector general said. The correct figures: criminal charges against 107 people and estimated losses of $95 million.

I guess that's close enough for government work.

What's not appropriate, even for government work, is that auditors said the feds continued to cite those statistics in other public announcements for 10 more months while knowing they were flawed.

In the department's written response to the audit, Deputy Attorney General James Cole did not dispute the findings but said the data misreporting "does not detract from the successes that the department achieved."

He cited statistics in the audit showing mortgage fraud convictions and indictments doubled from 2009 to 2010 and increased again in 2011.

"This set of statistics reflects a rapid mobilization of department resources to combat mortgage fraud during this period, and provides strong indicators of DOJ's success in investigating and prosecuting mortgage fraud," Cole wrote.

The inspector general acknowledged finding some examples that supported the department's claims about mortgage fraud being a high priority.

"However, we also determined during this audit that DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements," the report says.

Stacy Wisser of Lehighton isn't surprised, based on her experience with other federal authorities that were supposed to investigate accusations of another type of mortgage fraud — banks botching foreclosures.

She told me her family lost its dream home to foreclosure about five years ago after, she says, it was misled by a bank..

In 2012, they saw hope in a program established by the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision. It was supposed to take a second look at how foreclosures were handled and compensate homeowners if mistakes were found.

But that initiative, the Independent Foreclosure Review, was halted before it ever really got going.

"They didn't do a damn thing," Wisser told me last week.

Only a fraction of eligible homeowners applied for the program, and as the process dragged on, the large auditing, accounting and bank consulting firms hired by the banks to conduct the reviews were getting paid but homeowners weren't.

 

Back to March 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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