Mortgage Fraud

One positive of the recent “housing bubble” bursting is the increased awareness of mortgage fraud and heightened interest in combating the problem. In fact, the federal government recently launched “Operation Malicious Mortgage” in an effort to eliminate mortgage fraud around the country. It has resulted in the indictments of over 400 defendants. But, in order to combat such widespread fraud, the government needs the help of knowledgeable individuals to step forward and blow the whistle on mortgage fraud.

Mortgage fraud can take many forms. It generally involves denying qualified homeowners access to federal government programs, or making false statements in mortgage applications and appraisals for mortgages purchased or insured by a federal entity such as the Federal Housing Administration. It can also involve excessive fees charged to a federal entity that is issuing or insuring a loan. The perpetrators in these frauds might be:

What are some recent examples?

For example, mortgage fraud includes denying qualified homeowners access to the federal government’s Home Affordable Modification Program (“HAMP”), which was introduced to help people experiencing financial hardships and prevent home foreclosures. Under HAMP, certain individuals who experience financial hardship can qualify for mortgage modifications to help them stay in their homes. Banks that received federal funding under the Troubled Asset Relief Program (“TARP”) are required to use “reasonable efforts” to guide homeowners towards HAMP.

• In one False Claims Act lawsuit settled in 2012, the whistleblower alleged that Bank of America (“BOA”) actively tried to reduce the number of people who qualified for HAMP, and alleged that BOA steered homeowners towards its own (less affordable) loan modification programs, which ultimately saved BOA money at the expense of homeowners. Since BOA was required to use “reasonable efforts” to guide homeowners towards HAMP as a condition of the bank’s acceptance of federal funding under the Trouble Asset Relief Program (TARP), these actions constituted fraud against the federal government.

• Another example of fraud is knowingly qualifying homebuyers for bad loans. In another case also settled in 2012, a False Claims Act whistleblower who worked for LandSafe, a contractor of Countrywide Financial (a mortgage lender acquired by Bank of America in 2008) filed suit alleging that the company systematically undermined the appraisal process for home mortgages in order to approve as many as possible. The resulting bad loans were passed on to the Federal Housing Administration (FHA) for insurance, and Countrywide later filed insurance claims. This resulted in the FHA paying out money to Countrywide for loans that Countrywide knew should have never been approved.

What to do?

If you think you may have a case, please contact one of our experienced attorneys at (248) 539-7420.. Please note that it is important to act promptly, since many whistleblower protection laws have statutes of limitation. This means that if you wait too long to file a lawsuit, you may lose your ability to do so.