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The housing scene: No priority to chase loan fraud

The last thing Armand Assante wanted was to become a poster boy for mortgage fraud. But when the FBI wouldn’t get involved, he had to take matters into his own hands.

Fortunately, the 64-year-old actor has the wherewithal to take on a bank, in this case an “institution” that has been labeled a foreclosure mill by some. Most people don’t have the money or the will to fight their lenders, and end up losing their homes.

Assante’s case against Eastern Savings Bank of Hunt Valley, Md., is complicated, as most of these kinds of things are. But it pretty much boils down to this: He wanted to refinance his loan on his 222-acre family farm in Campbell Hall, N.Y., some 50 miles north of New York City. But Eastern turned him down.

It wouldn’t even take a $1.4 million payoff at the height of the mortgage meltdown, according to Assante’s complaint, when all he owed was $1.475 million.

The Emmy-winning actor almost lost the property in a bankruptcy proceeding in the process of trying to save the farm, which had been in his family for ages. And as he continued to fight, he discovered that he was paying an exorbitant interest rate – one that Eastern supposedly wanted to keep on its books – and that Eastern’s record in working with troubled borrowers ranged from poor to terrible.

At a time when the national average mortgage rate was roughly 4.5 percent, Assante was paying 9.9 percent. He also says that in 2009, 47 percent of Eastern’s mortgages were delinquent, whereas the national average was 5 percent. And that in 2008, the Maryland bank was earning 13 percent of its gross profit from foreclosures versus a national average of 0.5 percent.

Eastern was “writing risky loans in order to take them back,” says the actor’s attorney, Thomas Vasti.

There’s a lot more to this story, but the FBI wouldn’t get involved. Assante got in the door there because of who he is and who he knows. But that was it.

“They basically told me that they wouldn’t get involved unless the case was $5 million or more or something commercial,” Assante said. “I was told that they have so many cases that they were overwhelmed.”

But that doesn’t square with an audit of the Justice Department’s efforts to address the problem. Although the Obama administration has said wiping out mortgage fraud is a top priority, an examination by the DOJ’s Inspector General found that the department “did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements.”

The IG also found that the FBI’s Criminal Investigative Division ranked loan fraud as the lowest criminal threat in its lowest crime category. And while the FBI received $196 million in funding to investigate mortgage fraud from fiscal years 2009 through 2011, by the end of that time, the number of agents investigating such activities actually declined, as well as the number of pending investigations.

The report has attracted the attention of three federal legislators, including Sen. Elizabeth Warren, D-Mass., who is often mentioned as a possible presidential candidate in 2016.

Along with Reps. Maxine Waters, D-Calif., and Elijah Cummings, D-Md., senator Warren has asked Attorney General Eric Holder for a sit-down to discuss the apparent lack of effort in investigating and prosecuting crimes such as predatory lending, loan modification scams and abusive servicing practices.

The DOJ watchdog’s report certainly was damning. For example, it found “numerous significant errors and inaccuracies” in the claims made by Holder during an October 2012 press briefing, when the attorney general said the Distressed Homeowner Initiative had resulted in charges against 530 criminal defendants, including 172 executives, over the preceding 12 months.

Holder also announced that 110 federal civil cases were filed against more than 150 defendants for losses totaling at least $37 million and involving more than 15,000 victims.

But almost a year later, it was revealed that several of those statistics “were substantially overstated,” the report says. Specifically, only 107 criminal defendants were charged, not 530 as originally stated, and the total losses associated with Distressed Homeowners cases were $95 million, 91 percent less than the $1 billion reported by Holder.

Even worse, perhaps, is that although the department was aware of the “serious flaws” in its stats, it continued to cite them in its mortgage fraud press releases for 10 months.

But back to Assante, who sometimes plays a heavy on TV and in the movies. In this case, he alleges, the bank was the bad guy. An examination of his loan documents by forensic mortgage expert Michael Richardson revealed a “file full of fraud.” Among other things, Richardson says he found altered loan documents and missing, but required, disclosures.

Vasti, the actor’s attorney, believes Eastern has “been doing this to hundreds of people.” But this time, it appears, the bank has picked the wrong guy.