A lawsuit brought by two mortgage brokers accuses a number of large banks of defrauding veterans and other taxpayers out of millions of dollars.
The whistleblower suit, filed in a Washington court, cites banks like Bank of American, J.P. Morgan Chase and Wells Fargo of hiding, or disguising, illegal fees tied in with home refinancing loans for veterans. These banks have brought in millions of dollars connecting on to these loans that are guaranteed by the Department of Veterans Affairs.
The two mortgage brokers who were ultimately responsible for bringing the fraud to light explained that the banks would instruct brokers not to show attorney's fees on their estimates to veterans. Instead, they were instructed to tack on this sum to the title examination fee. This violates Veterans Affairs laws which say banks may not charge attorney or settlement closing fees to these loans.
The purpose behind these loans is to give veterans a chance to lower the interest rates on their existing mortgages or else shorten the terms. This applies to both retired and active-duty veterans.
Veterans attributed to $1.2 million in refinanced loans within the last decade. Estimates show that about 90 percent of all those refinanced loans were affected by this fraudulent practice.
Now, thousands of veterans are defaulting on these special loans, which have led the way for a number of foreclosures. This is having a domino effect and will ultimately cost taxpayers hundreds of millions of dollars.
The suit is seeking damages and civil penalties. Government officials are still deciding whether to join in on the case.
Source: Washington Post, "Suit alleges banks and mortgage companies cheated veterans and U.S. taxpayers," Steve Vogel, October 4, 2011.