From: Charles Cox [mailto:charles@bayliving.com]
Sent: Wednesday, October 05, 2011 9:26 AM
To: Charles Cox
Subject: Suit alleges banks and mortgage companies cheated veterans and U.S. taxpayers
Suit alleges banks and mortgage companies cheated veterans and U.S. taxpayers
By Steve Vogel, Published: October 4
Some of the nation’s biggest banks and mortgage companies have defrauded veterans and taxpayers out of hundreds of millions of dollars by disguising illegal fees in veterans’ home refinancing loans, according to a whistleblower suit unsealed in federal court in Atlanta.
The suit accuses the companies, including Wells Fargo, Bank of America, J.P. Morgan Chase and GMAC Mortgage, of engaging in “a brazen scheme to defraud both our nation’s veterans and the United States treasury” of millions of dollars in connection with home loans guaranteed by the Department of Veterans Affairs.
“This is a massive fraud on the American taxpayers and American veterans,” James E. Butler Jr., one of the lawyers bringing the suit, said Tuesday.
Tens of thousands of the VA loans have gone into default or resulted in foreclosures, resulting in “massive damages” to the U.S. government, the suit alleges. The faulty loans will cost taxpayers hundreds of millions of dollars, with the costs rising as more VA loans go into default, according to the suit.
The two mortgage brokers who brought the suit said in an interview that they were instructed by the lenders not to show attorney’s fees on their estimates, but to add them to the title examination fee.
Under VA rules, lenders can charge veterans for recording fees and taxes, credit reports and other customary fees, but they are not allowed to charge attorney’s fees or settlement closing fees. “It was gut-wrenching to us, seeing the brazenness” of the lenders, broker Victor E. Bibby said.
The case involves refinanced loans that are available to retired or active-duty veterans on homes they already own. The program is aimed at giving veterans the opportunity to lower their interest rates or shorten the terms of existing home mortgages.
The whistleblower suit, which was unsealed Monday, seeks to recover damages and civil penalties on behalf of the U.S. government. The Justice Department has notified the U.S. District Court that it is not taking over the case but is reserving the right to intervene at a later date, according to court papers.
“The government has not yet made a decision about whether to intervene in this case,” Sally Quillian Yates, United States attorney for the Northern District of Georgia, said Tuesday. “As the case develops, we will continue to evaluate the merits of the case, and we will consider intervening . . . if it becomes appropriate to do so.”
“This is a very significant case,” Patrick Burns, spokesman for the nonprofit Taxpayers Against Fraud, said Tuesday. “It deals with widespread fraud from veterans who were personally pickpocketed for hundreds if not thousands of dollars, and the liability has been shoved on the federal government.”
During the past decade, more than 1.2 million of the refinanced loans have been made to veterans and their families, and up to 90 percent may have been affected by the alleged fraud, according to attorneys for the plaintiffs.
“The banks collected hundreds of millions of dollars in hidden fees from veterans, and they obtained hundreds of millions of dollars in loan guarantees they otherwise wouldn’t have received,” said Mary Louise Cohen, a Washington attorney who is also representing the whistleblowers.
Works Rights Compliance Alliance 