As the former executive vice president in charge of fraud investigations at Countrywide Financial, Eileen Foster has a keen understanding of how the mortgage industry works. She has now acknowledged that mortgage fraud not only occurred at Countrywide, but was in fact a common practice. The concerns over mortgage fraud at Countrywide have followed it to their new owner, Bank of America. Public pressure to hold home lenders accountable for misrepresentations is at an all time high.
Despite the allegations of its former executive, no criminal charges have been filed against any of the top finance executives at Countrywide. This may also be a common practice, as federal prosecutors are pursuing criminal cases of financial fraud less frequently than at any time over the last 20 years. While criminal charges are uncommon, Countrywide has paid hundreds of millions of dollars to settle a class action settlement, a Federal Trade Commission complaint, and a dispute with the Securities and Exchange Commission.
Countrywide, like many banks and lenders, is alleged to have cut corners and taken illegal shortcuts in making loans and pursuing foreclosures. As the true scope of the problem becomes clear, prosecutors may be compelled to take a greater interest in the actions of bank executives whose companies participated in illegal mortgage practices.
At one point, Countrywide Financial was the largest mortgage lender in the nation. If mortgage fraud was a common practice at that firm, it may have spread to other firms as the only means of competing for business. Executives at every mortgage lending company should be very wary, as Ms. Foster’s admissions may draw the attention of state Attorneys General and federal prosecutors. If the problem was as widespread as she claims, they may have no choice but to expand the efforts in prosecuting people for mortgage fraud.
Source: The Huffington Post, “Former Countrywide Whistleblower: Mortgage Fraud ‘Systemic’,” by Harry Bradford, 5 December 2011