California Real Estate Fraud Report

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Mortgage Brokers File Whistleblower Lawsuit against Banks for Defrauding Veterans

As if the major banking institutions didn’t already have enough problems, they’ve now been hit with a whistleblower lawsuit by two mortgage brokers in the Atlanta area for massive fraud against our nation’s veterans and the federal government.

The lawsuit, which was just unsealed by the federal Court in Atlanta, contains stunning accusations that the banks circumvented the “unallowable fees” portion of the Interest Rate Reduction Refinancing Loans program for veterans. This program helps current or retired veterans to refinance their homes at lower interest rates or to refinance at a shorter term than their current mortgages.

The banks are alleged to have shifted their normal fees from unallowable fees (attorney’s fees and settlement closing costs) to the “allowable fees” column, which would include credit reports, taxes and recording costs, often padding the latter with fees from the former. In one of the exhibits proffered by the plaintiffs, Wells Fargo reported a $950 title examination instead of the more customary fee ranging from $125 to $200.

The nexus for this lawsuit is that not only were more than 1 million of the refinanced loans with the alleged excessive and illegal fees charged to veterans, but that the Department of Veterans Affairs, which guaranteed the loans, will bear the losses of the homes which subsequently went into foreclosure.

The plaintiffs are Victor E. Bibby, the president and chief executive of U.S. Financial Services and Brian J. Donnelly, the firm’s vice-president of operations. They are represented by James E. Butler Jr.,  of Butler, Wooten and Fryhofer and Mary Louise Cohen, of Phillips and Cohen.

The banks targeted by the whistleblowers’ lawsuit are Wells Fargo, Bank of America (Countrywide Home Loans), J.P. Morgan Chase (Washington Mutual Bank) and Ally Bank (GMAC Mortgage), SunTrust Mortgage, CitiMortgagePNC Bank (National City Mortgage), Mortgage Investors, First Tennessee Bank (First Horizon Home Loan), Irwin Mortgage and New Freedom Mortgage.

Read the original article in the Washington Post and National Mortgage News.

© Copyright 2007-2018 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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