While the Financial Crisis Inquiry Commission (FCIC) held a series of panels over the last two days in order to investigate the cause of the financial crisis, two panels on Thursday wound up focusing more on mortgage fraud and the government’s attempt to circumvent it.
Thursday’s panels, which included Eric Holder, U.S. Attorney General, spoke of the attempts the state and federal government were taking to prosecute mortgage fraud. Holder noted that the FBI is currently in the process of investigating over 2,800 cases of mortgage fraud, an increase of more than five times from 2004.
Of those cases, 1,842 involved more than $1 million in losses. As of November, federal charges relating to mortgage fraud were pending against 826 defendants. Reverse mortgage fraud was alluded to in the written testimony of Lanny Breuer, Assistant Attorney General, Criminal Division, but was not specifically a focus of the inquiry or any of the panelists.
During the panels, an interesting issue was raised by Illinois Attorney General Lisa Madigan and Colorado Attorney General John W. Suthers. Both attorney generals complained that the federal government had impeded their attempts at investigating mortgage fraud—especially on a larger scale.
Suthers, in his written remarks, wrote, “With respect to the few laws we did have back in 2005, we were largely powerless to enforce those laws against national banks and their lending affiliates and subsidiaries due to the aggressive stance federal regulators took to preempt state law, even with respect to predatory lending and deceptive advertising.”
Wrote Madigan, “In fact, in response to aggressive actions at the state level, federal regulators took unprecedented steps to shield national lenders and their subsidiaries from state enforcement and from the growing number of state anti-predatory lending laws on the books. The states have been leaders in enacting regulation to address the worst abuses in the mortgage industry.”
These issues were expanded upon during the panel testimony. Alleged Madigan, “In the years preceding the crisis, federal regulators often showed no interest in exercising their regulatory authority, or worse, actively hampered state authority.” It remains unclear what recommendations will emerge as a result of the FCIC’s investigation. Their report is due on December 15, 2010.
Write to Reva Minkoff
