Thank you, Willy, for that introduction. I very much appreciate not only your hosting us, but also your many contributions to the Department’s fight against mortgage fraud.
And thank you all for being here today. My name is Tony West, and I’m the Assistant Attorney General for the Civil Division of the Department of Justice. In that capacity, I oversee much of the Justice Department’s efforts to fight fraud, waste, and abuse, including mortgage fraud and other types of financial fraud.
And as Attorney General Eric Holder has often said, two of the Department’s highest priorities are fighting financial fraud and protecting our most vulnerable citizens, such as our elder citizens. That is what brings us together today.
As U.S. Attorney Ferrer explained, we are charging four defendants with conspiring to commit wire fraud by engaging in a nationwide reverse mortgage scam. These defendants allegedly targeted seniors with promises to refinance their existing mortgages.
But these promises were empty promises. Instead of helping elderly homeowners, we charge that three of the defendants – all loan officers – lied about the value of these seniors’ homes in appraisal documents – documents that they altered so that they could secure financing from a legitimate financial institution, Genworth.
And once they had received the money from Genworth, what did they do? In order to close the deal, we allege that they conspired with a fourth defendant – a title agent – who drew up false settlement papers to close the deal, cover up their fraud, and get the money from Genworth. Instead of using that money to pay off the original mortgages – as you are supposed to do when a home is refinanced – we allege that this title agent wired the money to the other co-defendants to be divied up amongst them, leaving seniors who believed their homes had been refinanced holding the bag. We understand some of these seniors are facing foreclosure right now because of this fraud.
In the end, we believe that the defendants diverted nearly $1 million in illegally obtained loan proceeds to themselves. So, money that should have gone to help seniors with modest incomes instead was used to line the pockets of these fraudsters.
As this case shows, mortgage fraud schemes can be complex, and their victims can range from borrowers to financial institutions to the federal government itself. That is why a coordinated, aggressive approach to prosecuting mortgage fraud and other financial crimes is so important.
And that is why fighting financial fraud is a top priority for the President and the Attorney General. As part of this effort, in November 2009, the President created the Financial Fraud Enforcement Task Force. The Task Force’s Mortgage Fraud Working Group, which I co-chair, brings together the government’s civil and criminal capabilities to uncover mortgage fraud schemes and hold those who commit financial fraud accountable to the fullest extent of the law. As a matter of fact, the Working Group held its first of several mortgage fraud summits right here in Miami.
And just over a year ago, the Attorney General announced the results of a nationwide sweep, “Operation Stolen Dreams,” which was the largest collective law enforcement effort ever aimed at combating mortgage fraud. Spanning a period of three months, Operation Stolen Dreams involved over 1,500 criminal defendants, including 525 arrests and estimated losses exceeding $3 billion. The takedown also resulted in more than 190 civil enforcement actions and recoveries of close to $200 million.
And as we mark the one-year anniversary of Operation Stolen Dreams, we’ve not let up in our fight against mortgage fraud. As the Information unsealed today illustrates, the Justice Department, standing side-by-side with our federal and state partners, continues to make progress on this front.
In Georgia, we’ve intervened in a qui tam lawsuit against Taylor, Bean & Whitaker Mortgage Corporation, alleging that the company violated the False Claims Act by falsifying loan documents, misrepresenting the amounts and sources of borrowed income, and other fraudulent acts. Earlier this year, several officers of the corporation were convicted of criminal violations related to Taylor Bean’s collapse.
In New York, the Justice Department in May filed a False Claims Act action against Deutsche Bank and Mortgage IT for alleged fraud in connection with FHA-insured loans.
And last December, also in New York, the Department took action against 14 defendants – residential property sellers, mortgage lenders, and appraisers – whom we believe engaged in a scheme to “flip” 17 homes to unsophisticated buyers at inflated prices. In fact, just last week, the U.S. Attorney in New York announced settlements with two of these appraisers that will require them to pay $100,000 to the U.S. and bar them from performing appraisals in sales involving federally-insured mortgages.
While these efforts are essential, we know we cannot prosecute our way out of this problem; enforcement alone is not enough. Prevention is the key. That’s why we are educating the public through efforts like the website www.PreventLoanScams.org, which has tips on how to avoid becoming a victim of mortgage fraud, how to get free loan counseling, and how to take action if you are a victim of mortgage fraud. You can also visit www.stopfraud.gov, the Financial Fraud Enforcement Task Force’s website, which provides information on reporting fraud and protecting yourself from scams.
Working together, we will continue our mission to protect families, taxpayers, and honest businesses from fraud.
Now, it’s my pleasure to introduce my friend and colleague on the Mortgage Fraud Working Group, John McCarty, Assistant Inspector General for Investigations at the Department of Housing and Urban Development.