HUD Accuses Big Banks of Receiving $6 Billion in Insurance Kickbacks

[The Straight Story]

HUD Accuses Big Banks of Receiving $6 Billion in Insurance Kickbacks

In addition to confronting court cases involving accusations of mortgage fraud, many of the nation’s largest banks could also be subject to criminal indictments from federal prosecutors, based on the findings of a government housing investigation.

The inspector general for the Department of Housing and Urban Development (HUD) discovered two years ago that several large banks had received $6 billion in kickbacks from mortgage insurers over a 10-year period. These findings were then turned over to the Department of Justice for further review. However, no action has been taken and it is unclear whether the Justice Department still considers the case active. Michael Stephens, who worked on the case before being appointed HUD’s acting inspector general, told American Banker that he was frustrated because “this thing has been going on for too damn long.”

The scheme allegedly began after lenders demanded the insurers “cut them in on the lucrative business of insuring the mortgages they produced during the housing boom,” according to Jeff Horwitz writing for American Banker. The two sides created “elaborate financial structures that had the appearance of reinsurance but failed to transfer significant amounts of risk to their bank underwriters.” The scheme was really “a way to hide illegal business referral fees.”

Because mortgage insurers’ business is completely dependent on giving banks what they want, the insurers created deals that guaranteed profits for the banks no matter how the real estate market turned.

http://www.allgov.com/Top_Stories/ViewNews/HUD_Accuses_Big_Banks_of_Receiving_6_Billion_Dollars_in_Insurance_Kickbacks_110912

[BR_Parkway]

1. WTF is wrong with our Dept of "Justice"? we must look forward I guess

[Supersedeas]

2. Eric Holder