In yet more fallout from the ongoing housing crisis, U.S. Attorney Preet Bharara is suing one of the country’s largest mortgage brokers for defrauding the public and the federal government to the tune of up to $834 million, which has to be one of the biggest mortgage swindles in history.
Prosecutors claim that Allied Home Mortgage Corp., a subsidiary, CEO Jim Hodge and Executive Vice President Jeanne Stell made reckless loans, ignored federal law and lied repeatedly, court papers show.
“Allied’s decade of concealed misconduct has resulted in tens of thousands of default loans, thousands of American homeowners facing eviction and hundreds of millions in loss to the United States,” the complaint charges.
Here’s the shocking piece: out of the 112,000 loans Allied originated between 2001 and 2010, 32 percent of them ended in default–nearly one in three. In 2006 and 2007, 55 percent of the loans defaulted.
Because the Federal Housing Administration insured the loans, Allied still made money even though the company was clearly giving out loans to people who couldn’t hope to pay them.
Several company employees raised issues with the practice, but Hodge overruled them, the complaint says. Hodge ruled with an iron fist, intimidating employes, monitored their email, installed electronic listening devices in offices and forced former workers not to talk via threats of litigation.
Stell coached branch managers on how to lied to government auditors. Even though the firm had 600 branches, it employed just two internal auditors. A group of auditors in St. Coix, meanwhile, didn’t even know what a mortgage was, the complaint says.
The company was repeatedly sanctioned by various states over the years, but never disclosed these actions to the feds. The company also employed more than a dozen people with felony convictions.
In one email after the feds demanded that the company follow the rules, Stell wrote, “[Hodge] has to be the biggest target personally for his disregard for the regulations. Serves him right never listening and thinking he didn’t have to play by the rules.”
The lawsuits seeks triple damages.