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September 1, 2014

Justice Dept. Faulted in Mortgage Fraud Probes

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Justice Dept. Faulted in Mortgage Fraud Probes

A new report accuses the Department of Justice of failing to make mortgage fraud a priority – despite public comments that it would – and for overstating the success of its mortgage fraud program.

An audit by the department’s inspector general alleges that mortgage fraud investigations by the DoJ from 2009 to 2011 “did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements.”

The inspector general report claims the DoJ lacks a “complete or reliable assessment” of its mortgage fraud efforts. For example, the report says that the DoJ overstated the results of a 2011 initiative targeting fraud against distressed home owners. At a press conference, the DoJ had reported 530 individuals were charged and the losses to home owner victims totaled more than $1 billion. But in the audit, the inspector general found only 107 people were charged and the losses from the fraud totaled $95 million. The DoJ failed to correct the public statements until 10 months later.

The inspector general’s audit also found that the FBI, an investigative arm within the DoJ, ranked mortgage fraud as its lowest criminal threat and reduced the number of agents investigating it. But, the inspector general notes in the audit, the FBI received nearly $200 million in funding to investigate mortgage fraud.

“The facts regarding the department’s work on mortgage fraud tell a much different story than this report,” says Ellen Canale, a DoJ spokeswoman. The agency disputes it did not place a high enough priority on mortgage fraud. “In the time period in question, the number of mortgage fraud indictments nearly doubled, and the number of convictions rose by more than 100 percent. Even at a time of constrained budget resources, the department has dedicated significant manpower and funding to combating mortgage fraud.”

Source: “DoJ Faulted by Watchdog Over Mortgage Fraud Program,” The Financial Times (March 13, 2014) and “Audit: Justice Department, FBI, Failed to Jail Mortgage Fraudsters,” HousingWire (March 13, 2014)

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