Shahien Nasiripour scored a foreclosure-fraud scandal scoop for The Huffington Post on Monday, reporting that audits of the mortgage industry conducted by HUD’s inspector general found five giant banks—Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial—defrauded taxpayers and violated the False Claims Act. HUD sent the findings to the Justice Department, which will now have to decide what to do next.
On Tuesday, Felix Salmon criticized The New York Times and Wall Street Journal for giving big play to the New York attorney general’s renewed interest in mortgage securitization while ignoring the HuffPo scoop. I thought maybe it slipped by the print deadlines. But three days later, those papers have yet to run anything about the news.
You can check out the rest here…
Some other notable quotes from the article above on the Hud investigations…
Yves Smith is brutal on what it means:
This revelation, that HUD audits of the biggest servicers over a mere two-month period, showed extensive fraud, is proof that abuses were extensive. It also establishes that the effort by Tom Miller to settle the 50 state attorneys general investigation quickly and and the recent “see no evil” Federal consent orders are a cover up. The fact that HUD found extensive misconduct over a similar time frame as the Foreclosure Task Force, which Assistant Treasury Secretary Michael Barr described as a ““11-agency, 8-week review of servicer practices, with hundreds of investigators crawling all over the banks” proves that the latter to be pure regulatory theater. And as we’ve noted, the Tom Miller-led effort has done no investigations, guaranteeing that the negotiators would have no bargaining power.
Mike Konczal says this:
If HUD can find that in two months how actively do other regulators have to be in not finding problems?…
The stalled 50-AG settlement should be put on hold until more is disclosed about what an actual investigation can get you. This finding by HUD should also tell skeptics that there is a there-there to these problems.
Three things are worth noting here. First, the HUD IG seems to have been able to conduct a much more thorough review of foreclosures than any of the bank regulators. The HUD IG’s office has a small staff. Compare this with the enormous examiner teams at the disposal of the OCC and Fed. Yet somehome the HUD IG has been able to accomplish a much more insightful review than the federal bank regulators. The clear implication here is that regulatory motivation matters in investigations….
Second, the all-clear sounded by the OCC and Fed on the servicing front just isn’t credible. This is a major problem for the US financial recovery…
Third, it’s worth noting that irrespective of whether DOJ pursues the HUD IG’s findings under the False Claims Act, HUD has a major disciplinary tool at its disposal: FHA lender eligibility.
And David Dayen:
A few things jump out. One, this is a similar charge, from the same HUD IG findings, that the Justice Department used on Deutsche Bank in a $1 billion lawsuit, saying they lied to acquire insurance reimbursements for FHA loans that went into foreclosure. That was probably a warning shot to the big banks as well as a case in its own right. Second, this is the reason HUD has been so involved in the state AG negotiations. This amounts to swindling their department out of money. Third, this shows what a useless cover-up that federal foreclosure task force turned out to be. Over the same time period, the HUD Inspector General, a relative backwater compared to the mix of regulators working on the task force, found multiple violations of law. Fourth, the False Claims Act is not necessarily the only law I would think to use to describe the banks’ abuses in the foreclosure crisis. But sometimes you have to use what you can. And essentially, this tracks a familiar crime. What the HUD IG found was that the documents they used to file for reimbursement were faulty.
Check out the original post in full here…