Foreclosure Fraud Whistleblowers Emerging


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With so many foreclosures being questioned because of “robo-signing” and other forms of  due diligence failure, it is only natural that some of the many mortgage employees asked to make unethical actions would come forward. The foreclosure problem has the capacity to produce more whistleblowers than any other single industry at present.

The problem started with the race to sell as many mortgage packages as possible leading to remiss work habits. According to one insider “…there is a lot of pressure to get deals done in a timely manner so they don’t have time to check every asset. The most I have eve checked on a deal is 30%…”  This type of poor mortgage underwriting has caused many mortgage failures leading to foreclosure. But in an industry with such low standards it has become apparent that many mortgage originators are making foreclosures without proper paperwork, procedures and sometimes without the note on the property. This has caused many banks to stop foreclosures either in the 23 states with judicial supervision or all 50 states.

Curiously, the first major story regarding a mortgage fraud whistleblower suit has only been reported in the UK press. Rachael Steinmentz filed a $51 million lawsuit against Capitol One in U.S. District Court in Manhattan. Steinmentz said she was forced into an “involuntary resignation” by her superiors in retaliation for refusing “to approve fraudulent, unlawful and bad loans” and reporting the activities to her superiors and authorities. The lawsuit further alleges that concerns about the illegal activity were reported to the New York State Banking department and that Capitol One violated Sarbanes- Oxley and banking whistleblower protections by forcing a resignation.

ABC news has at least reported that banks silenced potential whistleblowers when officials “ignored them, demoted them, harassed them or fired them.” The ABC report went on to note that former fraud investigators stated in interviews or court documents that the corporate culture allowed fraud to thrive.

An anonymous whistleblower speaking to Zero Hedge Blog noted that fraud was rampant, no loan documents were thoroughly researched or verified and pressure was placed on employees to work quickly to improve profits and market share. This particular whistleblower expressed grave concerns regarding the banks ability to legally attack whistleblowers.

Some writers in the blogoshpere find it remarkable that this topic is not showing up in the US mainstream media to any notable extent. Expect to hear more on “fraudclosure” as the situation worsens and more qui tam lawsuits are filed.





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