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Major Banks Accused of Defrauding Veterans, Taxpayers

While five major banks continue to deliberate with the state attorneys general for a settlement involving violations in mortgage documentation, the same five banks, plus several others, also face charges for committing fraud against veterans and taxpayers.


Two Georgia-based mortgage brokers â€" Victor E. Bibby, president and CEO of U.S. Financial Services, Inc., and Brian J. Donnelly, VP of operations of U.S. Financial Services, Inc. â€" brought the case before a federal court in Atlanta. The case was just recently released to the public.

Bibby and Donnelly accuse 13 banks of ""a brazen scheme to defraud both our nation's veterans and the United States Treasury of millions of dollars in connection with home loans guaranteed by the United States Department of Veterans Affairs,"" according to the court filing.


The loans in question were completed through the Interest Rate Reduction Refinancing Loans (IRRRL) program, which helps veterans refinance their home mortgages without paying certain fees.

The U.S. government bears the risk for these loans and must reimburse lenders if these loans default.

According to the court filing, ""Defendant lenders over-charges veterans, charged, unallowable fees, and then deliberately concealed those facts from the VA to obtain taxpayer-backed guarantees for those loans.""

The VA specifically prohibits lenders from charging veterans attorneys fees on IRRRL loans. However, Bibby and Donnelly claim lenders instructed them to add attorneys fees into title examination fees.

The banks allegedly ""submitted hundreds of thousands of false and fraudulent documents, records and claims,"" following which ""[t]ens of thousands of IRRRL loans have gone into default or resulted in foreclosure.""

In addition to being liable for any damages, the banks face penalties of up to $11,000 for each action that violates the False Claims Act â€" each time the banks applied for guarantees with false information .

According to the suit, the banks' actions add up to hundreds of millions of dollars in damages, which will ultimately be paid by the government and taxpayers.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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