Government steps up its mortgage fraud probe

The Justice Department has expanded its ongoing effort to uncover the mortgage fraud and abuse that helped precipitate the 2008 financial crisis, offering “substantial financial help” to corporate insiders willing to serve as whistleblowers.

The department’s Residential Mortgage-Backed Securities (RMBS) working group announced new resources Thursday in an ongoing effort to investigate misconduct, including the launch of a website to report fraud, the creation of a coordination team to facilitate investigations under way around the country, and a solicitation of “insiders” to help in those probes.

“The RMBS website is a new call to those insiders who know about fraud that occurred in the RMBS market, who know it’s time to expose that fraud, and who want to help us hold accountable those individuals and institutions who broke the law in pursuit of bigger paydays,” said acting Associate Attorney General Tony West.

“Although the working group and its members have done a tremendous amount of investigative work already - including having issued more than 25 civil subpoenas - we know that hearing from insiders is particularly valuable,” he said. “There are scores of people who worked in the RMBS market who acted responsibly but who also may have witnessed greed and misconduct that crossed the legal line and created havoc for investors, homeowners and our economy. We want to hear from them.”

The RMBS working group of the Financial Fraud Enforcement Task Force was established by Attorney General Eric H. Holder Jr. in January and has been dedicated over the past three months to initiating, organizing and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market.

The group and its members focus on investigating potential false or misleading statements, deception or other misconduct by market participants in the creation, packaging and sale of mortgage-backed securities. While the Justice Department said the group and its members’ specific efforts are law enforcement sensitive and, as a result, must remain confidential, generally it continues to:

• Identify specific RMBS offerings for priority investigation through the use of various forensic tools including risk-based analytics;

• Analyze pending private RMBS litigation throughout the country for evidentiary connections to existing law enforcement investigations;

• Convene operational meetings among investigators, attorneys, analysts and RMBS market experts and insiders.

Mr. West also noted that whistleblowers enjoy legal rights that protect their ability to speak out without the fear of retaliation.

“When whistleblowers summon the courage to come to us, we will do everything we can to maintain their confidence and trust,” he said.

A broad coalition of state and federal officials have dedicated lawyers, investigators, analysts and staff - currently more than 100 strong - actively engaged in RMBS investigatory work at the Justice Department, the U.S. attorneys’ offices, the Security and Exchange Commission, the New York State Attorney Generals Office, the Department of Housing and Urban Development, the FBI and the Federal Housing Finance Agencys Office of Inspector General.

The new website is https://www.stopfraud.gov/rmbs.html