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Report: Banks Will Continue to Evade Prosecution for Mortgage Misdeeds

A recent internal report generated by the U.S. Department of Justice concedes that the successes of the mortgage fraud crackdown efforts were grossly overstated,

Not only were the number of mortgage fraud cases egregiously low, the agency considered these matters to be of the lowest possible priority. In some jurisdictions, the report reveals, it wasn’t noted as a priority whatsoever. Our Miami foreclosure lawyers recognize this revelation as especially troubling, considering that it also emerges at the same time we find out Wells Fargo had created an internal guideline for its foreclosure lawyers on how to fabricate missing records, so that foreclosures wouldn’t be slowed.

These two points in conjunction give rise to the bigger question: Will banks continue to escape any prosecution or real accountability for their wrongs? A recent broadcast by Democracy Now! seems to indicate the answer is yes.

U.S. Attorney General Eric Holder had touted his agency’s efforts in recovering homeowner losses in the amount of $1 billion. But as it turned out, the real dollar amount was more than 90 percent less, closer to $95 million. This isn’t surprising when you consider many investigators, even when confronted with hard evidence of fraud, chose not to pursue investigations.

Back in 2009, Barack Obama issued an Executive Order that launched the Financial Fraud Enforcement Task Force, which was led by the Department of Justice and chaired by Holder. Consisting of more than 25 federal agencies, inspectors general, regulators and a host of state and local partners, the organization as tasked with enhancing cooperation of parties responsible for investigation and prosecution of significant financial crimes.

Subsequently, the organization founded the Mortgage Fraud Working Group as one of five subcommittees designed to attack the issue of mortgage fraud. Between 2009 and 2011, this group was given $196 million and employed some 412 people. Despite this, the number of mortgage fraud cases opened annually declined each year. Officials with the FBI attributed this in part due to enhanced underwriting standards that resulted in a reduction of mortgage frauds.

However, the reality is that in 2011, a total of nearly 750 mortgage fraud cases were closed by FBI field offices without prosecution. The vast majority of these cases were closed with “minimal or no investigation conducted,” the report found. What’s more, the report indicated that mortgage fraud cases are likely to diminish even further in the coming years, based on the fact that the issue continues to receive such a low priority from investigators.

What’s more, the number of criminal mortgage fraud cases filed in 2011 declined by 24 percent in a single year.

Meanwhile, documents in a pending Wells Fargo foreclosure case indicate that the bank had a sophisticated and systematic way of producing documents in cases where, problematically for them, the necessary records didn’t exist. In a manual entitled, “Wells Fargo Home Mortgage Foreclosure Attorney Procedure Manual,” which was effective from Feb. 24, 2012, attorneys were given instructions about how to obtain these records. Of course, given that the proper documents don’t exist in a lot of these cases, it’s clear that fabrication was occurring systematically. This practice has been long-suspected by foreclosure defense lawyers, but this appears to be the first in-writing proof of it.

Interestingly, the manual went into effect about a week after Wells Fargo agreed to a $25 billion mortgage fraud settlement with four other major banking institutions.

Unfortunately, given the Justice Department’s track record on these matters, we fear sanctions will be weak, if they are meted out at all.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

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