PIERCE COUNTY - The Great Recession wrecked a lot of lives. Mortgage markets collapsed. Home values dropped. Foreclosures skyrocketed. Families lost their homes. Some even ended up homeless.
And it could have been worse - lots worse - had it not been for institutions like HUD's Federal Housing Administration which, from 2008 through 2012, offered a safe harbor for almost 7.6 million homebuyers and homeowners seeking refuge from an economy gone bad. What FHA offered was what it had been created in the 1930's to provide - nothing flashy or gimmicky, just a secure, sound, smart way to own - and hold onto - a piece of the American Dream.
But like good people, good programs like FHA aren't invulnerable to bad people. Bad people like executives at Pierce County Commercial Bank in Tacoma whose lending division PC Bank approved 11,564 FHA, VA and conventional mortgages worth some $2.2 billion from 2004 to 2008. Honesty and integrity weren't exactly the hallmarks of mortgages Bank's executives approved.
Consider a multi-agency Federal investigation of the Bank by the FBI, the Internal Revenue Service, the Postal Inspection Service and Special Agent Dana Papesh of HUD's Office of Inspector General. Mortgages okayed by the Bank, it reported, were based on "fraudulent W-2s, pay stubs, verification of rent payments, deposit and employment forms." Fake "cashier's checks," were fabricated to "show a borrower was paying off debt." Cash-out re-fis were based on inflated appraisals. Some 20 percent of the Bank's FHA loans were, HUD's IG found, "in various stages of the foreclosure process" and the FHA had paid "at least" $75 million in claims to investors who'd bought the Bank's paper on the secondary market. The Bank also received $6.8 million under the Troubled Asset Recovery Program - The funds were never, as required, repaid.
Pure and simple it was "a conspiracy," said U.S. Attorney for Western Washington Jenny A. Durbin, "fueled by greed" that "helped pump up" the "housing bubble" and left "innocent families underwater on their mortgages." The Bank, added FBI Special Agent in Charge Laura M. Laughlin, was an "unscrupulous goliath" that "brokered thousands of loans with little regard for the ability of the borrowers to make good on the payments."
Thanks to a solid investigation and a vigorous prosecution, the bad guys didn't get away with it. Ten Bank executives were indicated. All ten pleaded guilty. Sentences ranged from home confinement to 10 years in Federal prison. Restitution was ordered to be paid to HUD, the Federal Deposit Insurance Corporation and Fannie Mae. And HUD's Departmental Enforcement Center is moving to make sure all ten are banned from doing business with FHA.
The good guys from the FBI, IRS, USPIS and HUD won big, thanks, said U.S. Attorney Durbin, to their "painstaking work" that resulted from their multi-agency collaboration. Ditto, said the Council of Inspectors General on Integrity and Efficiency in recently honoring the six members of the investigative team for "protecting the American homeowner from being victimized by unscrupulous mortgage and banking industry professionals."
Special Agent Papesh doesn't go to work each day thinking she's going to be a hero. And if you asked her or her colleagues from the inter-agency team that took down 10 bad guys, they'd probably say, "No big deal. We were just doing our jobs." And doing it, we'd add, very well.
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