How Are Government Officials Targeting Mortgage And Foreclosure Fraud?

Homeowners have been struggling with dishonesty in the home lending and mortgage industry for more than half a decade. When lenders first began issuing subprime loans in masse, many dishonest practices were used, ultimately proving extremely injurious to the economy in California and throughout the nation, explains an attorney. Not only was the federal government forced to bail out big banks and insurers, but the impact was also felt on a more personal level among the American people, as many lost their homes.
No doc or "liar's loans" were among some of the unscrupulous practices in which lenders engaged. Such loans were issued to people with limited or no income; they were encouraged to be dishonest about how much money they made in order to be approved for higher loans than they could ever afford to repay. People were pressured into refinancing their homes or taking out mortgages by being offered impossibly low teaser rates that ballooned up to ridiculous levels in just a few short years.

All this bad debt was then packaged into bonds, which were sold by big Wall Street banks who provided ratings models to Moodys and other credit rating agencies that resulted in the subprime debt being given AAA ratings (the highest rating available to indicate credit worthiness). Investors, of course, had no idea what they were buying, and insurance companies issuing insurance on the chance of default on these mortgages had no idea what they were insuring.

All of this dishonesty nearly brought down the economy and resulted in the federal government needing to step in and bail out AIG and Citibank. It also resulted in the bankruptcy of Lehman Brothers and the acquisition of Bear Stearns by JP Morgan.
Unfortunately, the banks did not learn their lesson about honest business practices, and the entire mortgage mess gave rise to a whole new category of scam artists who are attempting to capitalize on the misfortune of homeowners. As the tide of foreclosures began to rise as a result of the subprime mortgage mess, banks that had contributed to the collapse of the housing market through subprime lending began to engage in dishonest foreclosure practices.

In order to foreclose on homeowners, lenders must be able to prove that they actually have a security interest in the home and that the borrower is in default. They must also follow proper procedures for either a judicial or non-judicial foreclosure depending on state law and whether the mortgage in question has a power-of-sale clause. When a lender fails to do these things, the foreclosure is not a proper or lawful one.

The banks are not the only ones being accused of dishonesty during the foreclosure mess, but, fortunately, those who hoped to profit from the fraud are also being targeted. Recently, California Attorney General Kamala Harris created a Mortgage Fraud Strike Force to help bring anyone who defrauded innocent homeowners to justice. One of Harris' initiatives is to take action against some California law firms, as well as several attorneys personally, who promised relief to plaintiffs if they joined in mass-joinder lawsuits against mortgage lenders. That relief, of course, never came and the homeowners suffered injurious consequences when they did not get the reduction in interest rates, the reduction of loan balances, or the other benefits offered by the dishonest law firms.

More recently, California and Nevada have joined together to create a joint investigation alliance. The San Gabriel Valley Tribune indicates that the Mortgage Investigation Alliance will work to investigate all types of fraud-related scams, including misconduct in loan origination, securitization of subprime loans, and scams used to defraud borrowers during the mortgage crisis. The hope is that other states in addition to California and Nevada will also join together, along with banks and mortgage lenders, to help put a final end to the fraud that has plagued home lending and foreclosures for so long now.

By: Larry Drexel

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Larry Drexel is a Public Relations manager. To obtain free, informative books or articles he suggests visiting California personal injury attorney.