Shahien Nasiripour scored a foreclosure-fraud scandal scoop for The Huffington Post on Monday, reporting that audits of the mortgage industry conducted by HUD’s inspector general found five giant banks—Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial—defrauded taxpayers and violated the False Claims Act. HUD sent the findings to the Justice Department, which will now have to decide what to do next.
On Tuesday, Felix Salmon criticized The New York Times and Wall Street Journal for giving big play to the New York attorney general’s renewed interest in mortgage securitization while ignoring the HuffPo scoop. I thought maybe it slipped by the print deadlines. But three days later, those papers have yet to run anything about the news.
What gives?
Nasiripour did report on confidential documents, so I suppose it’s possible other journalists are trying to follow the story but can’t yet get it. But it’s much easier to browbeat sources on these kinds of things once one outlet has gotten the scoop. “The news is already out. Can you at least confirm it?” And Nasiripour got it from four sources.
Indeed, the Financial Times confirmed the news on Tuesday, but it didn’t credit the HuffPo, and it buried it in the second-to-last paragraph of a story on the New York AG story.
The New York Post also confirmed it on Tuesday and was nice enough to credit the Huffington Post, but it stuffed it in the last two graphs of its New York AG story.
Reuters just rewrote Nasiripour’s story, adding no apparent reporting of its own beyond getting some “no comments.”
I don’t understand why this story’s been so ignored by the business press. You’ve got fraud allegations at the too-big-to-fail Wall Street banks. Bank of America and another bank refused to cooperate with investigators. It implicates senior executives at Wells Fargo. The audit is being used by the state AGs as leverage in their settlement negotiations with banks over the foreclosure fraud scandal. And DOJ is considering using them to file civil and criminal charges.
Sounds like a big story to me.
Of course, the bloggers are on it while the mainstream press dithers. Yves Smith is brutal on what it means:
This revelation, that HUD audits of the biggest servicers over a mere two-month period, showed extensive fraud, is proof that abuses were extensive. It also establishes that the effort by Tom Miller to settle the 50 state attorneys general investigation quickly and and the recent “see no evil” Federal consent orders are a cover up. The fact that HUD found extensive misconduct over a similar time frame as the Foreclosure Task Force, which Assistant Treasury Secretary Michael Barr described as a ““11-agency, 8-week review of servicer practices, with hundreds of investigators crawling all over the banks” proves that the latter to be pure regulatory theater. And as we’ve noted, the Tom Miller-led effort has done no investigations, guaranteeing that the negotiators would have no bargaining power.
Mike Konczal says this:
If HUD can find that in two months how actively do other regulators have to be in not finding problems?…
The stalled 50-AG settlement should be put on hold until more is disclosed about what an actual investigation can get you. This finding by HUD should also tell skeptics that there is a there-there to these problems.
Three things are worth noting here. First, the HUD IG seems to have been able to conduct a much more thorough review of foreclosures than any of the bank regulators. The HUD IG’s office has a small staff. Compare this with the enormous examiner teams at the disposal of the OCC and Fed. Yet somehome the HUD IG has been able to accomplish a much more insightful review than the federal bank regulators. The clear implication here is that regulatory motivation matters in investigations….
Second, the all-clear sounded by the OCC and Fed on the servicing front just isn’t credible. This is a major problem for the US financial recovery…
Third, it’s worth noting that irrespective of whether DOJ pursues the HUD IG’s findings under the False Claims Act, HUD has a major disciplinary tool at its disposal: FHA lender eligibility.
And David Dayen:
A few things jump out. One, this is a similar charge, from the same HUD IG findings, that the Justice Department used on Deutsche Bank in a $1 billion lawsuit, saying they lied to acquire insurance reimbursements for FHA loans that went into foreclosure. That was probably a warning shot to the big banks as well as a case in its own right. Second, this is the reason HUD has been so involved in the state AG negotiations. This amounts to swindling their department out of money. Third, this shows what a useless cover-up that federal foreclosure task force turned out to be. Over the same time period, the HUD Inspector General, a relative backwater compared to the mix of regulators working on the task force, found multiple violations of law. Fourth, the False Claims Act is not necessarily the only law I would think to use to describe the banks’ abuses in the foreclosure crisis. But sometimes you have to use what you can. And essentially, this tracks a familiar crime. What the HUD IG found was that the documents they used to file for reimbursement were faulty.
The financial press’s virtual silence shows how important it is to have someone like Nasiripour working for new outlets like The Huffington Post that will put resources into a story like this.
The news is out even if the big boys have taken a pass.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.