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Big Banks Still Fight Fraud Charges

SS3-29-13King Solomon’s principles for ruling his people included fairness, just dealings and prudent action – notions stated again and again in his Proverbs and the Book of Ecclesiastes. “Envy not the unjust man,” he says in Proverbs 3:31, “and do not follow in his ways.” The sovereign also advocated the rule of law: “Keep the law and counsel, and there shall be life to thy soul and grace to thy mouth, “ he says in the same chapter, verses 21 and 22.

Today, a variety of settlements, legislation and lawsuits have been aimed at forcing the scandal-ridden giants of mortgage lending to keep the law and not behave unjustly. But even in the wake of the mortgage collapse of a few years ago and continued allegations of fraud, the nation’s big banks continue to face legal actions aimed at punishing fraud and establishing accountability.

A lawsuit filed in 2011 by the Federal Housing Finance Agency – the governing body for federal mortgage lenders Fannie Mae and Freddie Mac – accuses 15 large banks, including mortgage scandal stars Bank of America, Citigroup and JP Morgan Chase, of manipulating the sale of billions of dollars worth of mortgage backed securities that ended up failing in the housing crash of 2008. Those events paved the way for the subsequent robosigning scandal and lingering issues of fraudulent practices such as manipulating interest rates. Now, as the FHFA lawsuit continues, the banks named as defendants have filed new motions in the case in an attempt to quash the lawsuit completely.

It’s an unusual move in a long series of legal battles between the banks and various watchdog bodies intent on cleaning up the scandals surrounding mortgage lending. But it’s not the first move. According to industry reports, for over a year the courts have been denying the defendants’ motions to toss out the suit, citing limitations imposed on discovery and other processes that put them at a disadvantage.

The current motion claims that while the defendants in the case could take only 20 depositions in the case, the FHFA – the plaintiff – can take over 400 – a move that, they say, creates an unequal playing field that threatens their case. But the Federal District Court in Manhattan is standing firm, and the suit goes forward.

This case is among the latest in the continuing rounds of legal actions attempting to hold mortgage lenders accountable and establish standards of fair practices in the mortgage lending industry. Some of the defendants are involved in other, separate actions as well. Citigroup agreed – without admitting wrongdoing — in March 2013 to pay over $700 million in response to charges that the group deceived investors And Bank of America continues under investigation for accusations of fraud connected to LIBOR, the London Interbank Offered Rate that stands as the standard for short term interest rates worldwide.

Mortgage industry professionals and housing industry experts are closely watching the outcomes of these actions – the latest in a long series of attempts to bring accountability to mortgage lending. As the nation’s largest lenders work hard to position themselves as victims of a series of legal vendettas, the industry’s credibility suffers. And as new waves of fraudulent practices come to light, these legal actions aim to create a safer, fairer lending environment for the real victims – mortgage seekers including homebuyers and independent investors working with Jason Hartman’s principles for creating wealth with income property.

Register now for Jason Hartman’s spring Memphis Wealth Building Bus Tour and Real Estate Education Event at the Memphis Hilton this April 26-28, 2013. Tour income-ready turnkey properties in the Memphis area, meet real estate professionals and learn all the basics of building wealth through income property investing.  (Top image: Flickr/rieh)


The Solomon Success Team

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