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Justice Department Overstated Mortgage Fraud Work, Watchdog Says

m.omaha.com | June 8, 2014

By The Los Angeles Times

The U.S. Justice Department used faulty statistics to overstate its mortgage-fraud prosecution efforts and ranked mortgage fraud last in its list of priorities despite public pledges to combat these types of crimes, an internal watchdog says.

The 52-page report by the Justice Department’s inspector general found that for the fiscal years 2009 through 2011, the federal law enforcement agency’s effort to prosecute mortgage fraud fell short even after receiving nearly $200 million in federal funding.

This week’s report undercuts contentions by the federal government made four years ago that it would aggressively investigate cases of mortgage fraud, which proliferated following the housing bubble and eventual crash.

President Barack Obama in 2009 signed an executive order creating the Financial Fraud Enforcement Task Force, an interagency group that included 25 federal and state agencies, regulators and inspectors general. The task force was headed by a Justice Department official and among its missions was to ensure cooperation with the agencies.

Ellen Canale, a Justice Department spokeswoman, disputed parts of the report and said mortgage fraud convictions rose every year during the period the report examined. From 2009 to 2010, the number of convictions nearly doubled, she said, rising from 555 to 1,087.

“As the report itself notes, even at a time of constrained budget resources, the department has dedicated significant manpower and funding to combating mortgage fraud,” Canale said in a statement.

But for all the tough talk, the department’s internal watchdog found that in the FBI Criminal Investigation Division, mortgage fraud was barely a blip on the agency’s radar. In field offices in Los Angeles, New York, Miami and Baltimore — cities that saw large amounts of mortgage fraud — the crime was listed as a low priority or not at all, the report said.

“Despite receiving significant additional funding from Congress to pursue mortgage fraud cases, the FBI in adding new staff did not always use these new positions to exclusively investigate mortgage fraud,” the report concluded. “Moreover, when we attempted to assess the effectiveness of the Department’s efforts in pursuing mortgage fraud cases, we found that DOJ could not provide readily verifiable data related to its criminal and civil enforcement efforts.”

The inspector general’s report highlighted an October 2012 press conference in which the task force trumpeted its enforcement efforts as part of its Distressed Homeowners Initiative.

Attorney General Eric Holder said then that its efforts in the year before had resulted in 530 defendants being charged in several states. The attorney general had also announced that there were 110 federal civil cases filed against 150 defendants for losses totaling at least $37 million. In all, the agency said these cases involved more than 73,000 homeowner victims and total losses estimated at more than $1 billion.

The figures, however, were grossly overstated, the inspector general said. In reality, the number of criminal defendants charged was not 530, but 107, and the total estimated losses were only $95 million.


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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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