Mortgage Fraud Not a Priority at U.S. Justice Dept., Says Audit Report

The U.S. Justice Department has publicly stated that mortgage fraud — a crime which helped fuel the financial crisis and housing market meltdown — is a priority.
But an independent auditor of federal agencies’ efforts to crackdown on mortgage fraud, and to bring those accused of mortgage fraud to court, disagrees.
Privately, the Department of Justice “did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements,” according to a just-released report from the department’s Office of the Inspector General (OIG), an independent auditor.
“The OIG further found significant deficiencies in DOJ’s ability to report accurately on its mortgage fraud efforts,” according to the report.
The audit covered FBI efforts.
“We found mortgage fraud to be a low priority, or not listed as a priority, for the FBI Field Offices we visited, including Baltimore, Los Angeles, Miami, and New York,” the report states. “We also found that while the FBI received $196 million in appropriated funding to investigate mortgage fraud activities from fiscal years 2009 through 2011, in FY 2011 the number of FBI agents investigating mortgage fraud as well as the number of pending investigations decreased.”
Justice Department officials could not provide “readily verifiable data” related to its criminal enforcement because of “underreporting and misclassification of mortgage fraud cases” in the case-management system used by the Executive Office for United States Attorneys (EOUSA), the report reads.
The OIG said the Justice Department inflated the number of criminal defendants by five-fold during an October 2012 highly-publicized press conference.
At the event, Justice touted the success of the Distressed Homeowners Initiative, a mortgage fraud program involving the Justice Department and the Financial Fraud Enforcement Task Force. It took a year for the Justice Department to correct the mistake.
The DOJ responded to the report. Justice spokesperson Ellen Canale said: “The facts regarding the department’s work on mortgage fraud tell a much different story than this report. In the time period in question, the number of mortgage fraud indictments nearly doubled, and the number of convictions rose by more than 100 percent. As the report itself notes, even at a time of constrained budget resources, the department has dedicated significant manpower and funding to combatting mortgage fraud.”
Here is the OIG’s report.

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