July 30, 2021

HUD Audit Says 5 Largest Mortgage Banks Defrauded Taxpayers

The Department of Housing and Urban Development (HUD) Inspector General conducted a two month study of foreclosure practices, and in an unreleased confidential report has concluded that the 5 largest mortgage companies have defrauded the American taxpayer, according to the Huffington Post.  These companies are believed to be:  Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Ally Financial (formerly GMAC).

These audit reports have not yet been made public, and are considered confidential.  Investigative reporting on the part of Huffington Post have brought these allegations to light; to read the Huffington Post article, check out the link in the Resources section below.

Unreleased HUD Audit Alleges That Mortgage Banks Defrauded Taxpayers

Five completely separate investigations were carried out by the office of the HUD inspector general, and the conclusion was that these 5 banks violated the False Claims Act, a law dating back to the Civil War to protect the government from being defrauded.  This time – it was the taxpayers.

The audits centered around foreclosure procedures which have been the subject of ongoing talks between bank regulators and the major Wall Street banks and mortgage lenders regarding alleged fraud and abuse against homeowners during the foreclosure process.

While these existing fraud and abuse allegations have centered around lying during the foreclosure process, false and missing documentation – against the homeowner, these new allegations from these HUD audits allegedly detail fraud and abuse against the government, where banks applied for reimbursement from the government on homes that sold for less than the mortgage value – using false and erroneous documentation.

Bank of America, and another unnamed bank, did not cooperate with the audits, and senior bank managers at Wells Fargo are thought to have broken civil laws, the report alleges.

Numerous states and states Attorney Generals’ offices are already investigating banks for so-called “robo-signing”, where foreclosure documents are summarily signed and enforced, without any due diligence or process – sometimes thousands per day by a single person.  In addition to these allegations of outright fraud, and charges that the banks themselves created the housing and foreclosure crisis – many people believe that the banks are dragging their feet on the the home loan modification plans that have been put in place by the government to help people stay in their homes.

In separate but related news, Bloomberg is reporting that Jamie Dimon, Chairman and CEO of JP Morgan Chase, one of the banks listed in the HUD audit, apologized to shareholders at their annual meeting in Ohio for foreclosure ‘mistakes’, which included foreclosing on active-duty military personnel, saying “we deeply apologize.”

Resources and Links

Huffington Post Article

HUD Office of the Inspector General

Wikipedia Entry on False Claims Act

Wikipedia Entry on ‘Robo Signing’

Mike Konczal at Rortybomb has a nice roundup of various reactions from financial bloggers like Adam Levitin at Credit Slips and Yves Smith at Naked Capitalism.  For a more technical analysis of this unreleased HUD audit, and possible implications for banks you should check out these links.  Also, for a deeper dive into the long and twisted history of the housing and credit crisis, and the resulting foreclosure debacle – these are your go-to sources, along with Zero Hedge,  for the best reporting you can find on the subjects.

Bloomberg article on JP Morgan Chase Annual Meeting Apology

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