Federal lawsuit alleges massive mortgage fraud

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A whistleblower lawsuit unsealed in federal court in Atlanta charges that some of Georgia’s leading financial institutions engaged in mortgage fraud that amounted to hundreds of millions of dollars.

The lawsuit, which was initially filed by two mortgage brokers in 2006 but was made public this week, alleges that several banks and mortgage lenders hid illegal fees when refinancing home loans for veterans.

“This is a massive fraud on the American taxpayers and American veterans,” said Columbus attorney Jim Butler, whose law firm is one of those representing the whistleblowers.

“Knowing they weren’t allowed to charge the fees, the banks and mortgage companies inflated allowable charges to hide these illegal fees without telling the veterans who were the borrowers or the VA they were doing so,” Butler charged.

“The banks simply reduced the charges for unallowable fees to zero, and then added those fees in the spaces where allowable fees were to be shown,” Atlanta attorney Marlan Wilbanks said.

“Veterans don’t know what the usual and customary charges for those allowable fees are, and the VA understandably relied upon the banks to comply with VA regulations, rather than digging into every loan transaction,” Wilbanks said. “The banks took advantage of that reliance to cheat veterans and taxpayers.”

The financial institutions named in the lawsuit include Wells Fargo Bank, Bank of America, JPMorgan Chase Bank, GMAC Mortgage, CitiMortgage, Suntrust Mortgage, Washington Mutual Bank, PNC Bank (which acquired National City Mortgage Co.), Countrywide Home Loans, Mortgage Investors Corp., First Tennessee Bank (which acquired First Horizon Home Loan Corp.), Irwin Mortgage Corp. and New Freedom Mortgage Corp.

© 2011 by The Georgia Report

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Tags: GMAC Mortgage , home loan refinancing , Jim Butler , Marlan Wilbanks , mortgage fraud , U.S. District Court , Wells Fargo Bank