Calif. creates task force to probe mortgage fraud
California’s attorney general has formed a new task force to investigate mortgage fraud in the wake of practices that crushed the state’s housing industry and led to a wave of foreclosures.
The task force will be made up of 17 lawyers and eight state Department of Justice special agents who will pursue criminal and civil judgments on a broad spectrum of mortgage fraud cases, from predatory lending and loan modification scams, to fraud involving mortgage-backed securities, Attorney General Kamala Harris said Monday.
“We will work to safeguard the homeowner at every step of the process - from origination of a loan to its securitization, and we will prosecute to the fullest extent of the law those who take advantage of trusting California families,” Harris said in a statement.
The state’s foreclosure crisis has cost homeowners up to $640 billion in equity, Harris estimates.
It also has opened the door for scammers, many of whom have targeted homeowners by promising to get their lender to reduce their mortgage payments or even how much they owe on their mortgage altogether.
In the last year, the California Department of Justice has received thousands of complaints related to foreclosure scams, mortgage fraud, and mortgage servicing practices.
The Mortgage Fraud Strike Force will operate out of offices in Los Angeles, Fresno, San Francisco and Sacramento and will be made up of teams focusing on consumer enforcement, corporate fraud and criminal enforcement.
The teams will target predatory lending, unfair business practices in mortgage loan origination, deceptive marketing and loan modification fraud, among other scams.
The corporate fraud unit will focus on violations involving investments and securities tied to subprime mortgages, and fraudulent claims related to these securities made to the state or its pension funds.
The 2008 financial crisis was triggered by defaults on subprime mortgages - poor-quality loans that Wall Street financial institutions sold as bundled securities and promoted as safe investments.
The task force is distinct from an ongoing investigation into foreclosure practices by the nation’s five largest mortgage servicers. The attorneys general of all 50 states are involved in that probe.
California saw home values skyrocket during the housing boom, then plunge when the housing bubble burst in 2006. As values fell, many homeowners couldn’t refinance out of loans with baked-in adjustments to higher interest rates and began to default on payments, triggering a wave of foreclosures.
In recent years, a still-weak housing market and falling prices combined with a slowing economy and rising job losses have led to more foreclosures.
Some 32 percent of homes in California with a mortgage were underwater as of Dec. 31, according to CoreLogic. A home loan is considered to be underwater when the borrower owes more on the mortgage than the property is worth.
Last month, one in every 240 households in California received a foreclosure-related warning, according to RealtyTrac Inc. The firm tracks notices for defaults, scheduled home auctions and home repossessions - warnings that can lead up to a home eventually being lost to foreclosure.
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Information from: Los Angeles Times, https://www.latimes.com