Predatory Lending Scheme Prosecutions
1. United States v. Taylor, et al. (2007, Florida)
Facts: A mortgage broker and several accomplices were accused of falsifying borrower income and employment to qualify unqualified borrowers for high-interest subprime loans. Many loans later went into foreclosure.
Legal Issue: Bank fraud, wire fraud, mail fraud, and violations of TILA.
Prosecution: Federal authorities investigated through the FBI and mortgage industry regulators. Evidence included falsified loan applications and internal lender communications.
Outcome: The defendants received prison sentences ranging from 3 to 7 years and were ordered to pay restitution to victims. This case was a hallmark in targeting subprime mortgage fraud.
2. United States v. Countrywide Financial Corp. (2008, California)
Facts: Countrywide was accused of pushing borrowers into loans with hidden fees and inflated interest rates, while misrepresenting the true loan terms.
Legal Issue: Predatory lending practices violating federal fraud statutes and TILA disclosures.
Prosecution: DOJ filed civil and criminal investigations focusing on deceptive loan origination and packaging practices.
Outcome: Countrywide agreed to $600 million in settlements, including compensations to borrowers. Several executives faced civil penalties. This case highlighted corporate accountability in predatory lending.
3. United States v. Ameriquest Mortgage Co. (2005, Illinois)
Facts: Ameriquest engaged in “loan flipping” – repeatedly refinancing loans with high fees and misrepresenting loan terms to borrowers.
Legal Issue: Fraud, deceptive lending, and violation of TILA and RESPA.
Prosecution: The Department of Justice worked with state regulators to investigate loan files and marketing materials.
Outcome: Ameriquest paid $325 million in settlements and agreed to modify loans for affected borrowers. Several officers were barred from future lending activities.
4. United States v. New Century Financial Corp. (2009, California)
Facts: New Century was a large subprime mortgage lender accused of falsifying borrower documentation to meet aggressive sales targets.
Legal Issue: Bank fraud, wire fraud, and predatory lending practices targeting vulnerable borrowers.
Prosecution: Federal investigations uncovered falsified income statements, inflated appraisals, and approval of loans for unqualified borrowers.
Outcome: The company filed for bankruptcy; executives faced civil and criminal investigations. Victims were compensated through settlements totaling hundreds of millions of dollars.
5. United States v. IndyMac Bancorp Executives (2008, California)
Facts: IndyMac executives were accused of approving risky loans to unqualified borrowers, often concealing the risk of default and including high fees.
Legal Issue: Predatory lending, bank fraud, and violation of federal lending disclosure laws.
Prosecution: DOJ and federal regulators reviewed lending files and internal communications showing deliberate targeting of vulnerable borrowers.
Outcome: Several executives were prosecuted and sentenced to prison. IndyMac was taken over by the FDIC, and victims received partial restitution.
6. United States v. H & R Block Mortgage Corp. (2009, Missouri)
Facts: H & R Block was accused of steering borrowers into high-cost loans instead of affordable options and misrepresenting fees.
Legal Issue: Violations of TILA, RESPA, and federal anti-fraud statutes.
Prosecution: Federal authorities examined loan origination practices, borrower disclosures, and internal incentive programs.
Outcome: The company paid $40 million in settlements and restructured lending practices. Key executives faced civil penalties.
7. United States v. MortgageIT Holdings (2007, New York)
Facts: MortgageIT approved high-risk loans with inflated appraisals and misrepresented borrower income to qualify them.
Legal Issue: Fraudulent lending practices, wire and mail fraud, predatory lending.
Prosecution: Federal prosecutors and regulators audited mortgage files, revealing systemic abuse and falsification of borrower documents.
Outcome: MortgageIT paid over $50 million in settlements and agreed to industry reforms, illustrating corporate responsibility in predatory lending.
Key Takeaways from Predatory Lending Prosecutions
Federal Laws Used: Common statutes include TILA, RESPA, mail/wire fraud, and bank fraud laws.
Targeted Borrowers: Many cases involve vulnerable borrowers, often low-income or first-time homeowners.
Corporate and Individual Accountability: Both executives and individual brokers can be prosecuted.
Evidence Collection: Investigations rely on loan files, falsified documents, internal communications, and marketing materials.
Restitution and Settlements: Victims typically receive restitution, and companies may face multi-million-dollar fines.
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