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California Attorney General Announces Special Effort to Find and Fight Mortgage Fraud

May 25, 2011

As Riverside County foreclosure defense attorneys, we were pleased to see an announcement that the state of California is about to get serious about fighting mortgage fraud. As the Los Angeles Times reported May 23, Attorney General Kamala Harris announced that day that she was forming a Mortgage Fraud Task Force dedicated to finding and penalizing three broad categories of mortgage-related fraud. At the press conference, Harris noted that the housing downturn has sucked $640 billion in home equity out of the state, with expensive consequences for state and local government as well as individual homeowners. Her team will include 17 attorneys as well as eight special agents from the California Department of Justice.

The task force will investigate three type of fraud. One prong will look at deceptive or illegal lending practices by mortgage lenders, such as failing to fully disclose loan terms to customers before signing and approving loans for people the lender knew could not afford to repay them. Many such practices are against state or federal fair lending laws. Another prong will look at possible violations of California's False Claims Act. Like its federal counterpart, it forbids fraud against the state government -- such as concealing evidence of risk in mortgage-backed securities sold to state retirement investment funds. Finally, the task force will also go after fraud by foreclosure rescue companies and lawyers who promise help to homeowners but then disappear with their money. The initiative is separate from the multistate attorneys general effort against "robo-signing."

We support this effort, but we're particularly pleased about the efforts to root out and fight fraudulent lending practices, because those practices are at the root of many of the cases we see in our practice as Cypress foreclosure defense lawyers. Readers may remember the case of Countrywide Financial Corp., now a unit of Bank of America, which became an early casualty of the housing crisis because it handed out loans to many borrowers it knew couldn't pay, then securitized the loans to pass on the risk to investors. Countrywide and Wells Fargo have also been accused of targeting minorities for expensive subprime loans, a practice known as reverse redlining. If the state turns up evidence of widespread wrongdoing, it could even indirectly benefit borrowers not involved in its cases.

At Howard Law PC, we represent Californians who are in default or foreclosure, or know they soon will be, but believe they can save their homes with a reasonable modification to the loan. As many borrowers know all too well, lenders solicit loan modification applications -- then repeatedly lose the paperwork, send mixed messages to the borrower or foreclose while they are still considering the modification. Our Huntington Beach foreclosure defense attorneys have long since concluded that loan servicers don't really want to make modifications -- they want to rack up profits by drawing out the process to create as many fines and fees as possible. By suing, borrowers can submit their decisions to a judge who knows borrowers' rights and has no financial interest in the loan.

If your home loan is in foreclosure and you're tired of getting the runaround from your servicer, call Howard Law for a free consultation. You can reach us toll-free at 1-800-872-5925 or send us an email.