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Government Investigating Possible Law Violations in Foreclosure Crisis
The Department of Justice has opened an investigation to determine whether banks and other financial institutions broke federal law by using deceptive court documents to foreclose on homes. Although the investigation is just underway, it will probe whether companies deceived federal housing agencies like Fannie Mae and Freddie Mac, which currently insure a large percentage of American homes. The investigation will also examine whether firms committed wire or mail fraud in filing false documents.
The probe is intended to send the message that banks will be held accountable for illegal foreclosures. President Barack Obama’s Financial Fraud Enforcement Task Force is also taking a look at the foreclosure mess. “In more than 25 years dealing with major financial crisis issues, I have never seen this many agencies focused on a single issue,” said Andrew Sandler, an attorney who specializes in government investigations. “We are beginning to see signs of extensive governmental investigation that may also have criminal law implications.”
With reports that big banks filed court documents without proper review, federal investigators want to know if similar paperwork was submitted to housing agencies to collect insurance payouts. Bank employees have admitted to signing documents without reading them. If similar filings occurred at the governmental agencies, that action could constitute a violation of United States law. Although the investigation so far has no specific target, it could center on banks, independent mortgage servicers, law firms and other companies involved in the foreclosure process. Shaun Donovan, Department of Housing and Urban Development Secretary, is working with other regulators to assure that all foreclosures are legal. “We are working closely with others in the administration, as well as independent regulators and law enforcement agencies, in insuring that no one loses their home as a result of a mistake or criminal behavior,” Donovan said.