Mortgage Servicing Fraud Prosecutions
1. United States v. Countrywide Financial Corp., 2011
Facts:
Countrywide Financial engaged in improper mortgage servicing practices, including misapplying borrower payments, charging illegal fees, and pursuing wrongful foreclosures.
Many affected borrowers were in default, and documentation was falsified to expedite foreclosures.
Legal Issue:
Violations of RESPA, federal fraud statutes, and consumer protection laws.
Outcome:
Countrywide settled with the U.S. Department of Justice for $335 million.
Key point: Large mortgage servicers can be held liable for systematic misapplication of payments and deceptive servicing practices.
2. United States v. Ocwen Financial Corp., 2017
Facts:
Ocwen was accused of failing to properly credit payments, charging illegal late fees, and misleading borrowers about loan modifications.
Legal Issue:
Violations of the CFPB supervisory regulations, RESPA, and federal fraud statutes.
Outcome:
Ocwen entered a settlement requiring $150 million in borrower relief and strict oversight of servicing practices.
Key point: Servicing misconduct can trigger both civil penalties and operational reforms under federal oversight.
3. United States v. Saxon Mortgage Services (2009)
Facts:
Saxon Mortgage Services engaged in “robo-signing,” where employees signed foreclosure affidavits without verifying the underlying documents.
Resulted in wrongful foreclosures and misrepresentation of borrower debt.
Legal Issue:
Mail and wire fraud (18 U.S.C. §§ 1341, 1343) and violations of state foreclosure laws.
Outcome:
Saxon settled with federal regulators for $11 million, including restitution to affected borrowers.
Key point: Falsifying foreclosure documentation (“robo-signing”) constitutes criminal and civil liability.
4. United States v. Wells Fargo Bank, N.A., 2012
Facts:
Wells Fargo was accused of improper mortgage servicing practices, including misrepresenting loan modifications and wrongful foreclosure initiation.
The bank failed to implement promised loss mitigation programs.
Legal Issue:
Violations of federal fraud statutes, RESPA, and consumer protection laws.
Outcome:
Wells Fargo entered a $175 million settlement with federal authorities and agreed to extensive borrower relief programs.
Key point: Servicing fraud extends to mismanagement of loan modifications and improper foreclosure practices.
5. United States v. GMAC Mortgage (Ally Financial), 2011
Facts:
GMAC Mortgage engaged in improper foreclosure practices and failed to process mortgage payments correctly.
Misrepresentations were made to borrowers and courts regarding debt owed.
Legal Issue:
Wire and mail fraud, RESPA violations, and state consumer protection violations.
Outcome:
GMAC settled for $1.1 billion, including borrower relief and compensation.
Key point: Mortgage servicing fraud can involve both mismanagement of accounts and deceptive communications.
6. United States v. JPMorgan Chase & Co., 2013
Facts:
JPMorgan Chase faced allegations of overcharging homeowners, misrepresenting payoff amounts, and mishandling loan modifications.
Legal Issue:
Violations of RESPA, federal consumer fraud statutes, and fiduciary duties to borrowers.
Outcome:
JPMorgan agreed to a $13 billion national mortgage settlement, including $4 billion in direct borrower relief.
Key point: Servicing fraud by major banks can lead to massive multi-billion-dollar settlements.
Legal Takeaways from These Cases:
Robo-signing and Document Fraud: Falsifying foreclosure or servicing documents is a core prosecutable offense.
Misapplication of Payments: Failure to credit payments or improperly charging fees triggers liability.
Loan Modification Misrepresentation: Misleading borrowers about modification eligibility or outcomes is illegal.
Federal and State Oversight: RESPA, CFPB regulations, and federal fraud statutes provide enforcement mechanisms.
Settlements and Penalties: Banks and servicers often face multi-million-dollar or billion-dollar settlements, restitution, and oversight mandates.
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