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Lawmakers Take DOJ to Task Over Mortgage Fraud Report

MAR 17, 2014 2:15pm ET
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Three congressional Democrats want to meet with Attorney General Eric Holder about a watchdog report suggesting Department of Justice mortgage fraud investigations are a lower priority than publicly stated and DOJ statistics on fraud cases are inaccurate.

"This report calls into question the department's commitment to investigate and prosecute crimes such as predatory lending, loan modification scams and abusive mortgage servicing practices," Reps. Elijah Cummings, D-Md., and Maxine Waters, D-Calif., and Sen. Elizabeth Warren, D-Mass., wrote in a letter to Holder dated Monday.

The March 13 report by the DOJ's inspector general said that, despite its statements about federal law enforcement's raised focus on mortgage fraud, "DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements."

The report said the criminal investigative division within the Federal Bureau of Investigation ranked mortgage fraud as a low criminal threat, and mortgage fraud at FBI field offices in Baltimore, Los Angeles, Miami and New York was "a low priority, or not listed as a priority."

"We request a meeting to review the inspector general's findings and to understand the steps that will be taken to ensure that the department's efforts to identify and prosecute those responsible for fraudulent mortgage practices are equal to the harms such crimes have caused our constituents," Cummings, Waters and Warren wrote in their letter to Holder.

The watchdog also cited examples where law enforcement officials reported inaccurate and inflated data on efforts to prosecute defendants for mortgage-related offenses. A case management system to keep statistics "did not allow for a complete or reliable assessment of DOJ's mortgage fraud efforts," the report said. The IG also pointed to an FBI memorandum concluding that statistics on prosecutions Holder had used at a 2012 press conference "were substantially overstated."

"Even after identifying the possibility that the data reported at the press conference were in error, the department continued to cite them in public press releases," the three lawmakers wrote. They added, "The number of Americans who have been the victims of mortgage fraud is unknown and the inspector general's report indicates that the department's own data are unreliable indicators of the extent of the department's efforts to identify and prosecute those responsible for illegal lending schemes."

The IG report included several recommendations, including an acknowledgement of corrections to inaccurately reported data, better methodology for reviewing information before reporting results publicly and steps to "readily identify mortgage fraud criminal and civil enforcement efforts for reporting purposes."

In a Feb. 21 letter to the IG responding to its audit, Deputy Attorney General James M. Cole said DOJ has made progress with its mortgage fraud investigations.

"We agree with these recommendations, although we note…several points that deserve further emphasis," Cole wrote. "As an initial matter, the department has focused successfully on mortgage fraud violations. As the FBI data in the audit report itself reflects, the number of mortgage fraud convictions more than doubled from FY 2009 to FY 2010, i.e., from 555 to 1,087 convictions, and then increased further in FY 2011 to 1,118 convictions."

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