Monday, June 30, 2008

This is a bad thing, isn't it?

Then why didn't it get more publicity? This is lifted right from the Office of United States Attorney District of Arizona's website.

PHOENIX - The United States reached a civil settlement with Wells Fargo Bank and Ticor Title Agency of Arizona. In the settlement, Wells Fargo Bank has agreed to pay $4,046,786 and Ticor Title has agreed to pay $265,370.

Under certain circumstances, the Federal Housing Administration’s "pre-foreclosure sales" program allows homeowners with federally-insured loans to avoid foreclosures by listing their homes for sale. If a sales price is not enough to pay-off a loan, then the lender submits an insurance claim to the Federal Housing Administration which will pay the lender the balance owing on the loan.

The United States contends that Well Fargo Bank submitted more than 70 false claims to the Federal Housing Administration under the pre-foreclosure sales program and that Ticor Title prepared inaccurate escrow documents which allowed lenders to submit false claims to the Federal Housing Administration. The United States contends that it suffered $2,156,078 in losses. Wells Fargo Bank and Ticor Title deny the United States’ contentions but agreed to pay the amounts listed above.

The investigation leading to the settlement was conducted by the U.S. Department of Housing and Urban Development, Office of Inspector General.

RELEASE NUMBER: 2008-165(Wells Fargo settlement)

Unless I am completely misunderstanding this, Ticor Title and Wells Fargo were in cahoots to lie to the government--OUR government--about the sale price of properties that were in foreclosure but not yet owned by Wells Fargo. This is the way I understand it, and please someone correct me if I am mistaken: Homeowner owes Wells Fargo $100,000, stops making payments, and foreclosure is commenced. Homeowner tries to sell house before foreclosure sale, but can only get $80,000 for the place. The FHA's pre-foreclosure sale program would allow Wells Fargo to recoup that $20,000 (which is darned nice of us taxpayers). But that's not enough for Messrs. Wells and Fargo. They somehow get Ticor to prepare a HUD-1 that says the property only sold for $50,000, so now Wells Fargo can get a $50,000 shortfall (rather than the $20,000 to which they are entitled) from the government, as well as the $80,000 from the sale of the house. This would net them $130,000 rather than the $100,000 they were owed.