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.”