HUD Audits Accuse Major Lenders of False Claims Fraud

by devteam May 19th, 2011 | Share

The HuffingtonrnPost reported late yesterday that five of the country’s largest mortgage lenders may have defrauded taxpayers by filing false claims with the FederalrnHousing Administration (FHA). Confidentialrnaudits conducted on Bank of America, JP Morgan Chase, Wells Fargo,rnCitigroup, and Ally Financial (formerly GMAC) provided information whichrnhas now been referred to the Department of Justice for a decision on filingrncharges. </p

The author of the article, ShahienrnNasiripour, said the Inspector General (IG) of the Department of Housing andrnUrban Development (HUD) conducted five separate investigations in Februaryrnand March and concluded that the banks filed false claims against the FederalrnHousing Administration, a violation of the False Claims Act, a Civil War-erarnlaw.</p

Accordingrnto the Huffington Post, “The resulting reports read like veritable indictments ofrnmajor lenders, the sources said. State officials are now wielding the documentsrnas leverage in their ongoing talks with mortgage companies aimed at forcing thernfirms to agree to pay fines to resolve allegations of routine violations inrntheir handling of foreclosures.</p

“The audits conclude that the banksrneffectively cheated taxpayers by presenting the Federal Housing Administrationrnwith false claims: They filed for federal reimbursement on foreclosed homesrnthat sold for less than the outstanding loan balance using defective and faultyrndocuments.”</p

Apparently Bank of America and onernother company refused to cooperate with the investigations but the BoA audit findsrnthat the company failed to correct faulty foreclosure practices even afterrnimposing a moratorium that lifted last October. Back then, the bank said it wasrnresuming foreclosures, having satisfied itself that prior problems had beenrnsolved. </p

The Huffington Post quoted a federal official as saying that most of the targetedrnbanks have not seen the audits but they are generally aware of the findings. </p

The HUD actions are the latest in arnseries of investigations, discussions, and proposed settlements between lendersrnand mortgage servicers arising out of the housing and foreclosure crisis.  Earlier this week the New York AttorneyrnGeneral EricrnT. Schneiderman was said to have requested documents and requested “discussions”rnwith three major banks apparently regarding the institution’s securitizationrnactivities prior to the crisis (FULL STORY).  A taskrnforce composed of the 50 state attorneys general has been negotiating arnsettlement with major mortgage servicers, most of which are owned by the major banks,rnover claims of wrong doing related to foreclosures.</p

Also according to the HuffingtonrnPost, this week the mortgage servicers under investigation by the attorneysrngeneral offered $5 billion to set up a fund to help distressed borrowers andrnsettle claims of inappropriate foreclosures. rn”Thatrnoffer — also floated by the Office of the Comptroller of the Currency inrnFebruary — was deemed much too low by state and federal officials.  Associate U.S. Attorney General Tom Perrelli,rnwho has been leading the talks, last week threatened to show the banks thernconfidential audits so the firms knew the government side was not “playingrnaround,” one official involved in the negotiations said. He ultimately did notrnfollow through, persuaded that the reports ought to remain confidential,rnsources said. Through a spokeswoman, Perrelli declined to comment.”</p

ThernHuffington Post article is availablernat</b

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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