Allied Home Mortgage Nailed By Feds For $800 Million Fraud

In yet more fallout from the ongoing housing crisis, U.S. Attorney Preet Bharara is suing one of the country's largest mortgage brokers for defrauding the public and the federal government to the tune of up to $834 million, which has to be one of the biggest mortgage swindles in history.

Prosecutors claim that Allied Home Mortgage Corp., a subsidiary, CEO Jim Hodge and Executive Vice President Jeanne Stell made reckless loans, ignored federal law and lied repeatedly, court papers show.

"Allied's decade of concealed misconduct has resulted in tens of thousands of default loans, thousands of American homeowners facing eviction and hundreds of millions in loss to the United States," the complaint charges.

Here's the shocking piece: out of the 112,000 loans Allied originated between 2001 and 2010, 32 percent of them ended in default--nearly one in three. In 2006 and 2007, 55 percent of the loans defaulted.

Because the Federal Housing Administration insured the loans, Allied still made money even though the company was clearly giving out loans to people who couldn't hope to pay them.

Several company employees raised issues with the practice, but Hodge overruled them, the complaint says. Hodge ruled with an iron fist, intimidating employes, monitored their email, installed electronic listening devices in offices and forced former workers not to talk via threats of litigation.

Stell coached branch managers on how to lied to government auditors. Even though the firm had 600 branches, it employed just two internal auditors. A group of auditors in St. Coix, meanwhile, didn't even know what a mortgage was, the complaint says.

The company was repeatedly sanctioned by various states over the years, but never disclosed these actions to the feds. The company also employed more than a dozen people with felony convictions.

In one email after the feds demanded that the company follow the rules, Stell wrote, "[Hodge] has to be the biggest target personally for his disregard for the regulations. Serves him right never listening and thinking he didn't have to play by the rules."

The lawsuits seeks triple damages.

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I would like to see someone take the statistics of the delinquencies one step further. The facts that are being presented may not be giving a true picture which I feel is essential. Ok, Allied had high delinquencies. That is a fact. But I would like to know, of those delinquencies, how many of those loans were done outside of HUD's own guidelines? How many were approved through Automated underwriting? If you tell me they were indeed written outside of guidelines, then Allied needs to explain. HOWEVER, if these loans or the majority of these loans were written within HUD's guidelines and/or approved through Automated underwriting based on HUD's guidelines, there is a bigger issue everyone is neglecting to recognize. In the later case, Allied would not be at fault. HUD needs to accept responsibility. Many lenders have overlays or additional requirement, including Allied, because of HUD's lax guidelines yet the lender is being prosecuted. Doesn't anyone other than me see this? Give me those facts to truly determine who is at fault for the delinquencies. In this country, we are innocent until proven guilty or at least it used to be that way. HUD ruined Allied before any guilt was even determined.  That is not to profess their guilt or innocence; it is to state it was never determined first.  HUD, nor anyone else should have that kind of power.

NY Mortgage
NY Mortgage

I wonder if thisblog survives to occur so neatly in the network. Good luck, which you wish.

Frank Pyle
Frank Pyle

You are quoting the alleged suit. All allegations at thi point. FHA loans are higher risk than convential loans. That is the reason for the FHA gaurantee and how millions of people enjoy homeownership. How does allied differ from any othe FHA lender. Default rates are about the same among all FHA lenders. Due to FHA lower requirements and high unemployement the loans default at a high rate. What is next? Do we want Citi , Bank of America and a hanfull of mega wealthy banks do all home loans? Monopoly status is being forced on Americans by getting rid of the small lenders. Walmart did a great job too. Good luck with the dream of home ownership!

Dilbar ss
Dilbar ss

Recent financial industry distress publicly attributed to widespread mortgage loan defaults has generated mounting pressure on federal prosecutors to increase investigations into incidents of mortgage fraud across the nation.

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