DOJ Faulted for Making Mortgage Fraud a Low Priority

DOJ Faulted for Making Mortgage Fraud a Low Priority Photo: Diego M. Radzinschi/NLJ. Inspector General Michael Horowitz.

The Justice Department’s inspector general in a report released today criticized agency efforts during and after the financial crisis to prosecute mortgage fraud, finding that such cases were a low priority, despite public statements to the contrary.

DOJ’s mortgage fraud enforcement efforts were not “prioritized at a level commensurate with its public statements,” the 52-page audit report found. According to the report, the FBI “ranked mortgage fraud as the lowest ranked criminal threat in its lowest crime category.”

Further, investigators from the office led by Inspector General Michael Horowitz found that DOJ has an “inability to accurately collect data about its mortgage fraud efforts.”

The faulty data was “starkly demonstrated” when Attorney General Eric Holder held a press conference on Oct. 9, 2012, touting DOJ mortgage fraud efforts. Holder claimed that 530 criminal defendants had been charged and that 110 civil cases were filed involving $1 billion in homeowner losses.

When the inspector general the following month pressed for documentation to support the statistics, the errors came to light. Rather than 530 criminal defendants, there were only 107. And the cases involved $95 million in losses, not $1 billion.

DOJ corrected the statistics in August 2013.

Much of the problem with case statistics is attributable to the Executive Office for United States Attorney’s case management system, which the report said does not accurately capture mortgage fraud cases. For example, some cases are not coded as mortgage fraud if it’s not the leading charge in a criminal case. Also, the system can’t specifically identify civil mortgage fraud cases.

The report recommended that DOJ improve its methodology for collecting data about mortgage fraud cases and review it carefully before releasing it to the public.

The report did identify a few bright spots, praising the Criminal Division’s leadership of a mortgage fraud working group and participation by the FBI and U.S. attorneys in more than 90 local task forces.

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