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Banking and Mortgage Fraud
Banking and Mortgage Fraud
Financial Industry and Mortgage Fraud
The American financial industry, which includes mortgage and banking institutions like Bank of America and JP Morgan, is the recipient of billions of dollars in taxpayer funds from the U.S. Treasury and the government. These funds have only increased as a result of the financial and mortgage crises in recent years. As a result, the government has a keen focus on banks and mortgage companies that defraud the government by submitting fraudulent loans or supporting documents to government-sponsored entities like Fannie Mae and Freddie Mac.
Because of the significant money and resources the government puts into the financial industry, especially the housing market, qui tam whistleblowers play a key role in exposing fraud in the financial industry, which jeopardizes not only billions of dollars in taxpayer funds, but puts families and homes at risk from improper and fraudulent lending practices. Government investigations of alleged fraud in the housing and mortgage industries, many of which were initiated by whistleblowers, have accounted for an unprecedented $1.4 billion in settlements and judgments in 2012 under the False Claims Act.
Common Forms of Financial Industry Fraud
Financial industry fraud takes many forms, but can be grouped into two major categories: (1) Federal Bailout and (2) Mortgage Fraud. Each is discussed below.
(1) Federal Bailout. In late 2008, theUnited States passed a massive $700 billion bailout program known as TARP, or the Troubled Asset Relief Program. TARP, along with other similar but smaller bailout programs, was designed to stabilize the financial system following the credit crisis in 2007-2008. In the years since its passage, TARP has grown from a $700 billion program to one that involves almost $3 trillion in government funds. In other words, TARP has grown into a program of unprecedented scope, scale and complexity.
Because of its complexity, TARP is fraught with potential loopholes for people who would like to rip-off the government. These include such things as:
- Falsely certifying that an institution is eligible for TARP funding
- Conflicts of interests among related entities managing TARP funds (e.g., a bank that receives TARP funds for its loan department but uses the funds for its brokerage department)
- Collusion to use TARP funds for personal use (e.g., setting up dummy corporations to apply for TARP funds then using them for personal gain)
- General failure to comply with ongoing TARP regulations (e.g., maintaining certain loan reserves for liquidity ratios)
If you believe someone is misusing TARP money, then there is a potential False Claims Act violation.
(2) Mortgage Fraud. The United States insures thousands of residential mortgages through the Federal Housing Administration, or FHA. The FHA is frequently defrauded by mortgage companies and other financial institutions that use and submit false information to the FHA so that their mortgages will qualify for government backing. This can be done in a variety of ways, but some of the most common include:
- Overstating the borrower’s income and lying about the borrower’s employment history or length of employment
- Not disclosing the extent of the borrower’s debts, liabilities or credit history
- Incorrectly stating the amount of down payment on the loan, or submitting information about fictitious down payment amounts
- Inflating property values by using bogus appraisals
Mortgage fraud can take many forms. If a bank or mortgage company is submitting incorrect information on loan paperwork, there is a potential False Claims Act violation.
Financial Fraud Attorneys
Robbins Geller Rudman & Dowd LLP is committed to fighting for our whistleblower clients in their courageous efforts to combat fraud. If you are aware of an instance where banking or mortgage fraud has occurred and are thinking of blowing the whistle, please contact us. We can help you understand how to file a claim, what compensation you may be entitled to for your effort, and what protections you are afforded as a whistleblower, and can answer any other questions you may have concerning the False Claims Act.