FBI begins Countrywide criminal inquiry: paper

NF Reporter · 03-09-2008, 09:22 AM

Reuters - The FBI has begun a criminal inquiry into the largest U.S. mortgage lender, Countrywide Financial Corp , for suspected securities fraud as part of investigations into the mortgage crisis, The New York Times reported in Sunday editions.

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waltky · 04-02-2008, 10:39 PM

Gonna go up their butt with a microscope...

Judge to let feds look at Countrywide records
Wed., April. 2, 2008 - Justice Department investigating whether lender abused borrowers

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A federal judge ruled the Justice Department can subpoena documents and question Countrywide Financial Corp. executives under oath to determine whether the lender abused borrowers and the bankruptcy-court process. U.S. Bankruptcy Judge Thomas Agresti said “it certainly has not been proven that Countrywide did anything wrong,” but noted a bankruptcy trustee “has made a showing of a common thread of potential wrongdoing” in several cases. The cases are a representative sample of nearly 300 Pennsylvania bankruptcy cases involving Countrywide borrowers. The potential wrongdoing warrants further inquiry by a bankruptcy trustee on behalf of the Justice Department, Agresti said.

Countrywide and other mortgage companies have come under scrutiny amid a surge in home loan defaults by borrowers with poor credit histories. Countrywide, the nation’s largest mortgage lender and home loan servicer, has sought to address the growing number of defaults on its books by modifying loan terms, working out long-term repayment plans and other actions. The company has acknowledged errors in handling some debts, but has denied any systematic effort to thwart bankruptcy protections to collect money.

Some bankrupt borrowers, however, have accused the company of threatening them with foreclosure even after they made payments under court-approved bankruptcy plans that were meant to shield them from Countrywide’s subsequent efforts to collect the debts. Agresti’s 50-page ruling was issued late Tuesday in Pittsburgh. A Countrywide attorney did not immediately return a call for comment Wednesday. Countrywide attorneys had previously argued that the subpoenas were beyond the scope of the bankruptcy trustee’s powers and that the trustee’s requests to interview Countrywide executives under oath amounted to an illegal “fishing expedition.”

More Judge to let feds look at Countrywide records - Mortgage Mess - MSNBC.com

waltky · 04-19-2008, 12:23 AM

FBI Braces For Spike in Corporate Fraud...

Mueller Expects More Corporate Fraud Cases
April 18, 2008 - FBI Director Says He Expects a 'Ripple Effect' from the Subprime Crisis

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The number of corporate fraud cases the FBI investigates is set to rise as part of the fallout from the subprime mortgage collapse, director Robert Mueller said today. "We likely will see more corporate fraud cases in the months to come because of the ripple effect of the subprime crisis and its impact on the credit market," Mueller said in a speech to the American Bar Association.

During the wide-ranging speech on corruption and white collar crime, Mueller briefly expanded on remarks made the day before confirming that the FBI is investigating 19 institutions relating to the subprime lending crisis and the financial and investment vehicles used by those firms. "We are targeting accounting fraud, insider trading and deceptive sales practices," Mueller said. "These investigations may well lead to other instances of fraud from investment banks and private equity firms to hedge funds."

The FBI director talked about his previous experience in the private sector as a defense lawyer before the ABA's litigation lawyers' annual conference in Washington, D.C. "I saw executives who did not start out intending to break the law," he said. "They would argue they were playing by the same rules as everyone else. They began to believe their own explanations. But it is a slippery slope from behavior that skirts ethical or legal boundaries to behavior that crosses the line completely."

The FBI has begun to task more agents and field offices to work on financial crime matters. The bureau has about 200 agents working on mortgage fraud investigations. Wednesday, members of the Senate Appropriations committee expressed concerns that the FBI was not providing enough resources to deal with the increasing number of mortgage fraud cases and the recent trend toward reverse mortgages, which are targeting the elderly and recent retirees.

More ABC News: FBI Braces For Spike in Corporate Fraud

waltky · 06-10-2008, 01:52 AM

Lotta hot air but nothing substantial...

Subprime criminal probes yet to catch big fish
Mon Jun 9, 2008 WASHINGTON - More than a year into a U.S. housing market meltdown, prosecutors have yet to bring major cases against mortgage industry leaders -- and the slump's worst may pass before any charges are filed.

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After the FBI revealed in January that it was looking into possible mortgage-related corporate crime such as accounting wrongdoing or insider trading at 14 major companies, the number of firms under scrutiny has grown to 19 but developments have slowed to a trickle. Separately, federal authorities are probing about 1,200 cases of individual mortgage scams.

Just because authorities have proceeded quietly does not mean the probes have stalled. Legal experts say complex financial frauds can take years to investigate before prosecutors make a decision on whether they have a case. And outlines of the government's strategy are taking shape. The FBI and U.S. Department of Justice say they are examining some major industry executives in their investigations, with FBI Director Robert Mueller saying the bureau is working to identify "large-scale industry insiders" in its probes.

But the prospect is unlikely of a major federal task force zeroing in on a large company, as with the special group created several years ago to investigate the collapse of Houston-based energy trader Enron. However, the Justice Department has created a mortgage fraud working group to oversee issues such as standards for measuring losses and establishing a central storehouse for mortgage documents.

Authorities also are unlikely to look to force companies out of business through criminal charges, well aware of the many job losses spurred by the demise of accounting firm Arthur Andersen after it was indicted over its dealings with Enron. The subprime meltdown began more than a year ago, gaining momentum with the April 2007 bankruptcy of New Century Financial Corp NEWCQ.PK, which once epitomized the boom in extending home loans to borrowers with weak credit histories.

More Subprime criminal probes yet to catch big fish | Special Coverage | Reuters

waltky · 08-26-2008, 11:53 PM

Subprime loan fraud still a problem...

Mortgage fraud still soaring
August 26, 2008: A crackdown on underwriting has failed to halt an explosion of fraudulent home loans.

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With the housing market in turmoil and lending standards tougher than ever, you'd think that the kind of unscrupulous activity that helped plunge the industry into crisis would be a thing of the past. You'd be wrong. Mortgage fraud is still soaring, according to a new report from the Mortgage Asset Research Institute (MARI), a division of ChoicePoint. (CPS) The study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.

The big jump was a surprise even to MARI. "We were stunned," said spokeswoman Jennifer Butts. "It shows that some folks [in the industry] are desperate." Loan applications are at an eight-year low, according to the Mortgage Bankers Association, and deals are harder than ever to come by for real estate professionals. Loan originators, real estate agents and property appraisers are all scrambling for clients. Making things even more difficult, mortgage lenders have tightened underwriting standards after getting clobbered with soaring delinquencies and foreclosures.

Now, the credit histories of many applicants are not good enough to get approved for mortgages, except through some creativity - or chicanery - by brokers and loan officers. The most common type of fraud that MARI found pertained to employment history and income. Many applications exaggerated how much borrowers earned and misrepresented their job descriptions. The biggest increase came from a jump in the number of undisclosed or incorrectly reported debts, liens and judgments.

Most fraud involves average home buyers whose lending officers feel compelled to tweak their applications. But some involves criminal enterprises. Cases of identity theft accounted for 6% of all mortgage fraud in Illinois, for example. In many of these deals, crime rings use phony identities to obtain mortgages on properties they don't own, then take the cash and vanish.

Same industry, same problems

waltky · 10-11-2008, 03:20 AM

Their day will come...

White-collar ex-con: Jail looms for mortgage execs
Wed., Oct. 8, 2008 - Former MCI manager who concealed improprieties now lectures on ethics

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Average Americans want to know how the lords of investment banking could keep telling investors everything was just peachy while the nation’s financial structure was crashing down around them. But not Walt Pavlo. He knows all too well how easily it can happen. Pavlo knows because he’s been there. He’s a convicted felon, a one-time senior manager at MCI who set out to do his job and ended up in prison. The 46-year-old Tampa resident told his story — which he also recounts in a book, “Stolen Without a Gun” — as part of TODAY’s series on cheating.

Bad decisions

Pavlo has no doubt that when federal investigators get done sorting out the mess that began with the subprime mortgage market, some of the people responsible will be going to prison, just as he did in 2001. They’ll go for the same reason: not because they are bad people, but because when things started to go wrong, they started to make bad decisions that eventually became criminal ones. “People are going to go to jail for covering up stuff as it started to go south,” Pavlo told TODAY. “It’s going to take a while. It’s going to be a year or two years from now.”

Pavlo has been out of prison since 2003. He earns his modest keep these days by traveling the country, telling students in business schools how he went from a kid raised to know right from wrong to part of a conspiracy that stole $6 million from MCI customers in a mere six months. He never thought himself capable of the things he did. He grew up in a devoutly religious family and went to Catholic schools. Even today he retains the clean-cut look of the high school quarterback he once was.

“People are lulled into believing they are that special to deserve that kind of money,” Pavlo said. But there comes a time when the goals set by supervisors become harder – if not impossible — to meet. And that’s when trouble can start. “Once that tide starts turning, how do I react? You find people covering up the bad news: ‘I can’t be failing.’ When faced with the tragedy, that’s when their character’s tested the most. A lot of people are going to fail that test, and they’re going to be going to prison.” For Pavlo, the path to prison started long before he turned to embezzlement and fraud.

More Does prison loom for mortgage execs? - TODAY: People - MSNBC.com

waltky · 10-20-2008, 06:39 AM

Day of reckoning almost here...

Government may file subprime charges soon
Thurs., Oct. 16, 2008 - Attorney: ‘Dramatic results’ coming in lender mortgage fraud investigation

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The top federal prosecutor in Los Angeles indicated Thursday that charges are coming soon from a sweeping investigation of banks and subprime lenders for their role in the U.S. mortgage crisis. "I think we are going to see some fairly dramatic results in the near future," U.S. Attorney Thomas O'Brien told The Associated Press. "Mortgage fraud is an extremely important issue to me and to the people of this district." A grand jury is investigating at least three mortgage lenders — Countrywide Financial Corp., New Century Financial Corp. and IndyMac Bancorp Inc.

Prosecutors are looking at whether mortgage fraud and other white-collar crimes were committed. O'Brien has just finished his first year overseeing the Central District of California, seven counties that became the heart of the nation's real-estate boom and bust. The area is home to many lending firms, including some which lured homeowners into taking out exotic loans with cheap teaser rates that mushroomed after a set time. Thirty-four lawyers currently are looking at mortgage fraud and other white-collar crimes, now one of O'Brien's top priorities.

The government is pursuing a "surgical approach" in its investigations and hopes to streamline its prosecutions by seeking indictments with only three or four counts, instead of spending several years seeking additional charges. "We offer them three or four counts," O'Brien said. "We would get the same sentence and we plead them out and we move on to another crook."

Government may file subprime charges soon - Mortgage Mess - MSNBC.com