Real Estate & Property Law

Despite Widespread Wrongdoing, Fed'l Prosecution of Institutions Involved in Mortgage Mess is Rare

Despite widespread evidence of fraud and other wrongdoing, federal prosecutions related to the reckless mortgage lending that nearly brought down the nation’s banking system in recent years are few and far between.

From the “robosigning” of thousands of mortgage foreclosure documents by individuals who apparently didn’t have authority to do so to the thousands of active-duty members of the military who have lost their homes to foreclosure, even though they are legally eligible for stays and it is a misdemeanor to refuse to grant them, serious documented problems with the system abound concerning these and other issues, according to a Reuters special report.

“I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history,” said visiting Yale Law School professor Raymond Brescia. “I can’t think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases.”

However, the news agency says it has been able to identify only one case under investigation by the feds targeting institutions, such as big banks and major foreclosure law firms, largely responsible for the debacle. (That institution is a Florida-based company that subcontracts with banks to provide foreclosure services.)

The government’s Operation Stolen Dreams prosecution focuses on small-scale operators who have defrauded banks and homeowners through falsified documents, even including some closing attorneys. But major foreclosure law firms and others accused of systemic wrongdoing are so far taking a pass on federal prosecution, perhaps because such institutional cases are more complex and difficult to pursue.

Related coverage: “Del. AG Alleges Deceptive Practices in Latest MERS Suit, Seeks Temporary Court-Ordered Shutdown” “Federal Construction-Defect Probe Looks at Allegedly Rigged HOA Elections at Las Vegas Condo Complex” “Judge Kills Foreclosure Over Law Firm’s Late Verifications, Speculates re ‘Conflicted Robosigner’”

Reuters: “NY court allows lawsuit over bogus home appraisals”

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