June 4, 2014 View entire issue of ANO         Close 


Investigators Probe Mortgage Fraud at Smaller Banks

After making billion-dollar settlements with the nation’s largest banks, federal investigators are now focusing their attention on smaller lenders, looking at the banks’ mortgage lending and loan servicing practices in the years leading up to the financial crisis, The Wall Street Journal reported May 28.

The U.S. Department of Housing and Urban Development, HUD’s inspector general and the U.S. Department of Justice are involved in the probe.

Investigators specifically are looking into whether or not lenders met underwriting standards for loans insured by the Federal Housing Administration. Any money federal investigators are able to recoup  from lenders could help stabilize the agency’s finances; in 2013, the FHA required a $1.7 billion infusion of taxpayer dollars.

Among the mid-sized banks under investigation are Fifth Third Bancorp, SunTrust Banks, Regions Financial Corp., U.S. Bancorp and Capital One Financial Corp. Thus far, none of the banks have been accused of wrongdoing, the Journal reported.

Regions Financial said in November that it had received a subpoena from HUD’s inspector general related to mortgage practices, including its underwriting practices on FHA loans. Fifth Third Bancorp also disclosed it was under investigation. Both banks said the probes were related to an industry-wide investigation that was in its early stages.

U.S. Bancorp, the largest U.S. regional lender by assets, acknowledged May 7 that it was under investigation.

SunTrust announced in October it had settled with federal authorities over mortgage issues, including loan-servicing practices and faulty documentation for FHA-insured loans. The bank agreed to pay $468 million in fines and hand out $500 million more to customers in the form of loan modifications and other mortgage adjustments, the Journal reported.

SunTrust faces a separate Justice Department suit over loans it sold to Fannie Mae and Freddie Mac, as well as an investigation into its participation in a loan-modification program.

According to the Journal, some mid-size banks also are coming under investigation for how they packaged mortgage loans into securities before the financial crisis. In February, Capitol One announced in regulatory filings that it had received requests from regulators, law enforcement authorities and the mortgage-securities task force.




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