THE UNITED States is facing its gravest housing crisis since the Great Depression.
By at least one measure, today's crisis is worse. Housing prices have now fallen 33 percent from their peak, compared to 31 percent during the depression. Yet despite the almost unprecedented nature of the housing collapse, the Obama administration has remained stunningly passive if not utterly disinterested.
This inaction is criminal given the fact that the largest U.S. banks have used illegal means to file and carry out foreclosures. From illegal notary signatures to filing claims without proof of being the legitimate lending institution, the banks are being allowed to flout the legal process and literally steal people's homes.
This isn't just banter from critics of the Obama administration. It was the finding of an internal review conducted by the Department of Housing and Urban Development (HUD). According to an investigative report by Shahien Nasiripour last May, HUD launched an undercover investigation into the whether the nation's five largest mortgage lenders--Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial--had defrauding taxpayers in their handling of foreclosures on homes with government insured loans.
The HUD investigation found that the banks had cheated the public--and in doing so, had broken the law. Specifically, the banks "filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents," Nasiripour wrote.
Other probes have revealed further wrongdoing by the banks--for example, investigators found that lenders who were pursuing foreclosures improperly handled 49 percent of Federal Housing Administration loans. And in a random review of several thousand foreclosures serviced by the 14 largest mortgage firms, government officials found 50 active-duty military personnel in foreclosure, which is a violation of federal law.
The Bank of America (BoA) has been singled out for particularly nefarious behavior. BoA is the largest holder of mortgages in the U.S. and the prime perpetrator of using fake documentation to illegally foreclose on homes.
Its use of illegal documents became so widespread and obvious that the bank imposed a moratorium on its foreclosures last October. Despite this brief reprieve, BoA quickly restarted its foreclosure mill. The HUD investigation charges that even after the moratorium, BoA continued to use illegal means to foreclose on homes.
HUD turned its findings over to the Justice Department, but to date, the federal government's main law enforcement body hasn't decided to pursue charges. Not only has the Obama administration not taken this opportunity to stand up for homeowners and taxpayers by exposing the banks--it is appears to be preparing to let them completely off the hook.
The HUD investigation suggested the banks could be charged with a Civil War-era law called the False Claims Act, which was passed to stop companies from swindling government funds. The penalties for crimes committed under the False Claims Act allow the government to collect three times the actual damages.
But instead of trying to make the banks pay for their behavior, the White House has teamed up with the Treasury Department, HUD officials and bank supervisors to compel the 50 state attorney generals to negotiate a weak settlement that would end all future legal action against banks for mortgage fraud.
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