Federal prosecutors sued Allied Home Mortgage Capital Corp. and two top executives Tuesday, accusing them of running a massive fraud scheme that cost the government at least $834 million in insurance claims on defaulted home loans. Houston-based Allied and its founder and chief executive, Jim Hodge, were the subject of July 2010 stories by ProPublica, which detailed a trail of alleged misconduct, lawsuits and government sanctions spanning at least 18 states and seven years. Borrowers recounted how they had been lied to by Allied employees, who in some cases had siphoned the loan proceeds for personal gain. Some borrowers lost their homes.
The suit, filed Tuesday in U.S. District Court in Manhattan, seeks triple damages and civil penalties, which could total $2.5 billion. Simultaneously, the U.S. Department of Housing and Urban Development suspended the company and Hodge from issuing loans backed by the Federal Housing Administration. The company was also barred from issuing mortgage-backed securities through the Government National Mortgage Association (Ginnie Mae).
Allied has billed itself as the nation’s largest, privately held mortgage broker, with some 200 branches. (At one point, the company operated more than 600.) The sprawling network made Hodge a rich man with properties in three states and St. Croix in the U.S. Virgin Islands and two airplanes to get to them.
Allied and Hodge played the “lending industry equivalent of heads-I-win and tails-you-lose,” U.S. Attorney Preet Bharara said at a news conference Tuesday. “The losers here were American taxpayers and the thousands of families who faced foreclosure because they could not ultimately fulfill their obligations on mortgages that were doomed to fail.”
You may read more about Allied at the Propublica link. Propublica has been following this story since 2010.
On a related note, is anyone else baffled on why former President Bush’s role as traveling salesman for sub-prime mortgages has been completely forgotten?
“We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.”- President George W. Bush, Oct. 15, 2002
I actually remember applause lines like this, because Bush flogged it FOR YEARS, at nearly every campaign stop and in nearly every speech. I’ve been a little mystified why it’s been completely forgotten. The Ownership Society. Remember that?
From his earliest days in office, Bush paired his belief that Americans do best when they own their own homes with his conviction that markets do best when left alone. Bush pushed hard to expand home ownership, especially among minority groups, an initiative that dovetailed with both his ambition to expand Republican appeal and the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.
When conservatives claim “government” caused this, they might want to look back at the federal employee who was the biggest cheerleader: former President Bush. Pushing home ownership served conservative political goals, until it didn’t. Weird how that’s gotten lost in the shuffle.
Darrin West could not believe it. The president of the United States was standing in his living room. It was June 17, 2002, a day West recalls as “the highlight of my life.” Bush, in Atlanta to introduce a plan to increase the number of minority homeowners by 5.5 million, was touring Park Place South, a development of starter homes in a neighborhood once marked by blight and crime.”Part of economic security,” Bush declared that day, “is owning your own home.”
soonergrunt
Being a conservative operation, they almost certainly had somebody in Rove’s shop working to turn the potential failure of the program into a political spear at the same time they were doing it.
“The mortgage mess started because the government forced the lenders to give mortgages to poor people…”
kay
@soonergrunt:
It’s just amazing to me. It was a Top Tier political argument for conservatives:
“what we’re doing for minority and working class people on home ownership means we’re good people”
Bush was strutting around claiming credit, FOR YEARS.
Just…down the rabbit hole. Like it never happened. He RAN on it in 2004!
Steve
Most conservatives I know will freely admit that the push for home ownership, particularly minority home ownership, was a bipartisan endeavor over the years. It’s just that with the benefit of hindsight they all think it was wrong.
scav
@kay: They’re airbrushing his presidency. The entire first decade of this century will blank and they’ll look innocent and quaintly confused when people wonder how the nation ended up with this hangover.
beltane
This must be why GWB was at Goldman Sachs headquarters yesterday afternoon, getting some kind of prize for his efforts http://dailykos.com/story/2011/11/02/1032656/-CONFIRMED:-OWS-Surrounded-Goldman-Sachs-HQ-Chanting-Arrest-George-Bush-w-GW-Inside?via=siderec
Greece seems to be on the verge of bypassing the whole elected politician as front man thing as their next PM is set to be a former vice-president of the ECB. It is so honest for them to dispense with the formalities in this way.
kay
@scav:
I want to revisit.
Let’s start with here, with one of Bush’s biggest donors.
Elizabelle
@Steve:
I am just hearing “Barney Frank. Barney Frank. Chuck Schumer.”
Erin
What’s going on with the RSS feed? Suddenly I’m only getting 100 words of the article, and then a “Read More” link. I hope this isn’t a permanent change. I need the whole article in my RSS feed. By all means, put ads in the feed; you need to make your money too, and I never use AdBlock for that reason. But 98% of my feed reading is done on my phone, and if I’m only going to get 100 words of the article and then have to click through to the full site… Well, then I’m done reading Balloon Juice, sad to say.
scav
@kay: I’m all for it. I practically lived at Calculated Risk from 2004 on and have the scars on my tongue to prove it.
kay
@Elizabelle:
Yeah. Me too.
singfoom
Good job federal prosecutors. I hope that they destroy this company and bankrupt and/or imprison the top executives involved.
2 down, thousands to go. It is definitely a start. I guess I’ll wait to break out the champagne until the case is decided, but it is heartening to see at least charges brought.
kay
@Erin:
I’m sorry. I don’t know anything about it.
Suffern ACE
@Elizabelle: Well, of course you are. You don’t expect Democrats to have a strategy of actually pushing back against that wave?
The Moar You Know
You forget the Party’s position: President Bush always was and always will be a liberal.
So, liberals and government caused the housing crisis.
See how it works? It’s so easy a child can do it – move the goalposts until you’re soaking in a warm glow of righteousness once again.
Steve
@Elizabelle: Well of course. The more aggressively partisan version of the story goes, “Liberals passed the CRA, and Bush went along with it so he wouldn’t be called a racist.” When they bring up Barney Frank that’s more the Fannie/Freddie piece of the story, and they have some BS argument that “Bush wanted to regulate Fannie/Freddie more closely, but Barney Frank blocked it!” Of course it hardly even matters because Fannie/Freddie are pretty much irrelevant to the subprime crisis.
kay
@Steve:
Thanks. Great point. I wanted to mention that, and don’t want to conflate and muddle the whole thing, but it gets too complicated :)
Cacti
That was also around the time that Dick Cheney was telling us that “Deficits don’t matter” as taught by Ronald Reagan.
cat
@kay: @Erin:
Try a different RSS reader? Google Reader is still showing the full articles.
Walker
@scav:
Ah, CR during the Tanta (and pre-Tanta) years. Bill is still in my RSS feed, but I don’t visit as much as I used to.
a hip hop artist from Idaho (fka Bella Q)
@kay: I suspect that’s part of the problem with trying to explain the subprime crisis and its origins to civilians – it gets complicated. And most people, however well meaning, don’t have to patience for an explanation. Or the attention span, in some cases.
kay
@a hip hop artist from Idaho (fka Bella Q):
It’s just classic Bush, though, isn’t it? If you actually listened to him when he was President. A Compassionate Conservative.
All of his purely political gestures and rigid conservative dogma were dressed up in this sort of misty-eyed, quasi-religious garb.
I know the fad for “compassionate conservatives” on the Right has passed, and they’re back to being out and up-front douchebags, but I know they’ll roll it out again if they see a political upside, so I don’t want to forget it.
Former President Bush sold mortgages as a way to burnish the (horrible) conservative record on treatment of minorities and working class people. He also did it to help his campaign donors. That’s what happened.
Romney veers that way now, rhetorically. We’ll see it again.
Keith
Hey, I worked for Allied for a bit. In fact both mortgage companies I have worked for are in trouble with the feds.
TheOtherWA
Randi Rhodes plays a soundbite from Bush from 2002. He says “Just because you’re poor, it doesn’t mean you can’t have a nice house.”
She’s been playing that a lot lately. Even if she’s not on a station near you, get the i heart radio app on your smartphone and listen to liberal talkers wherever you are.
catclub
@The Moar You Know: “You forget the Party’s position: President Bush always was and always will be a liberal.”
Except when they are still pushing the line that wrecking Iraq was the key to the Arab spring.
Except when they are pushing the line that Bush was the key to killing Osama bin Laden.
The only thing I give credit to Bush for is stopping Cheney from bombing Iran. _There_ he was the sane one.
catclub
@Keith: One of my favorite Demotivators: ‘The common element in all your unsatisfying relationships is you.’
Ben Cisco
I’m digging this Bharara dude. Here’s hoping for bigger and better things in his future.
Comrade Dread
Because it serves their interest to blame the government for the fact that a large (and increasing) number of Americans cannot even fulfill the basic component of the American Dream: owning their own home.
If they couldn’t blame the government, they’d have to admit or do something about the declining wages of the middle class and a complete lack of class mobility.
LOGGERMAN
This is off topic. CNBC, Squak Box, interviewed a U. Michigan prof Mishkin as some king of expert. Mishkin was interviewed in one of those Wall Street movies and exposed as a flat out liar. When the interviewer confronted him with the evidence, Mishkin laughed. CNBC heckuva job. What a fucking disgrace.
kay
@Comrade Dread:
I read an account yesterday of a meeting between my US Rep and local farmers.
Their main complaint was “too many food stamps!”
Now. How hard is it to figure out that if people can’t afford food, so receive food stamps, that when they don’t receive the food stamps, they won’t be buying agricultural products?
What do farmers (who grow food) think is going to happen if we cut people off food stamps?
Farmers bitching about food stamps. Good Lord. Just no logical connections made, ever, between a government program and anything else.
Jay in Oregon
@kay:
Out of curiosity, I wonder how many of those farmers receive subsidies or other government assistance?
kay
@Jay in Oregon:
A lot. That information was released on-line in (I believe) 2006 in a searchable database.
Liberals here had a lot of fun with it :)
Many of our local rock-ribbed anti-government conservatives are “gentlemen farmers”, in that they inherited ground that came with a nice taxpayer subsidy attached.
Many of them are “real” farmers, but a lot of them (here, anyway) are lucky heirs who don’t farm at all. They ALL get federal subsidies or set-asides or one thing or another. That’s what the meeting was about. They were asking for more money. They see food stamps as cutting into “their share”, but of course food stamps could be looked at as an ag subsidy.
It’s all revenue to the grocery store, right?
kay
@Jay in Oregon:
You’ve heard Michele Bachmann? Government is stealing from her grandchildren by subsidizing the farm her in-laws own.
I think it’s generous of me to prop up the value of Michele Bachmann’s grandchildren’s inheritance, but we obviously disagree, because she’s incapable of looking past her own nose.
It’s honestly insane. It’s like they were dropped in this country by a helicopter, fully grown, and when their lifetime ends, the country ends. Nothing accrues. Value is never added, only subtracted, and only subtracted from them, personally.
It’s self-absorption to the point of mental illness.
Comrade Dread
@kay: I’d imagine it’d go something like: “Well, there’s a ‘right’ kind of government handout and a ‘wrong’ kind of government handout.”
The right kind of handout goes to me: the hardworking, independent, scrappy underdog doing my best to scrape together a living in spite of larger corporations undercutting my prices through volume; without which I wouldn’t be able to survive and my farm would go under.
The wrong kind of handout goes to that other guy: the lazy shiftless jerk sucking at the government teat because he’s just not working hard enough to acquire the skills to compete in this global economy. And if we just get rid of his subsidy, he’d have to work harder and it wouldn’t affect my income at all.
kay
@Comrade Dread:
Exactly. I read the whole thing. It could be summarized as “I need mine, and I’ll get more if they get none”. They don’t want small government. They just want ALL government to flow to THEM.
They all must be reading the same chain email, too, because they all claim to “know” a single mother with 13 children who grosses 120k a year on “welfare”.
There’s only 30 thousand people in the whole county. I’m dying to ask who this mysterious woman is, and whether she lives in a shoe. I think I remember that fairy tale.
gene108
@soonergrunt:
Yes. It. Did.
It started in 1977 with the Community Reinvestment Act, which triggered a meltdown 31 years later. It’s all part of the liberal plot/long-war strategy to turn America into a Socialist hell-hole, as detailed in Saul Alinsky’s playbook.
/snark
McJulie
I remember this vividly, because I was the first person I knew personally to start claiming there was a real estate bubble. Nobody believed me, because I am neither an economist nor a real estate agent. I’m just a person capable of doing math. And what I saw was that housing prices were skyrocketing while wages were flat. A very simple and obvious discrepancy — it doesn’t add up, so where is all that extra money coming from? Credit! Credit galore!
Anyway, I’d just seen the exact same thing with stocks and dot-com. But this seemed to me much more insidious. The insane overvaluing of internet companies was at least driving technological innovation that could continue to fuel the economy even after the crash. It hurts, but it’s easier to recover.
A real estate bubble collapse not only leaves no lasting benefit, but it also leaves a lot of actual physical damage behind. Things like urban and suburban blight, historical neighborhoods ruined, natural environments destroyed to build housing developments that will sit empty for years until they get torn down.
Based on rhetoric like this coming from Bush and Greenspan, I was pretty sure the Bush administration was inflating the bubble on purpose to artificially prop up an economy that would otherwise still be mired deeply in a recession. It was a smokescreen for tax cuts, nothing more. They knew that people who feel poor are much less sympathetic to the notion of cutting taxes on the wealthy. So he wanted them to feel wealthy.
Remember the “wealth effect”? Yeah. Republican smoke and mirrors.
kay
@McJulie:
My husband was like you. He was actually fretting, for years. “HOW are they going to AFFORD that house? They won’t be able to buy anything else!”
He was all worried about everyones’ finances, because foreclosure is just brutal on families. The kids lose faith in their parents’ ability to take care of them when they’re booted from the family home, it rattles them, and then the parents fight and divorce, which just makes the whole mess worse, because then there’s TWO desperately poor households, rather than one moderately poor household.
Irresponsible lenders and Mr. Bush did a real number on working class families. They crushed them under all that debt.
McJulie
@kay:
Crushed them and then had the audacity to blame them for their “bad decisions.”