Did any federal agency offer early aid to homeowners? You bet. Visit this link for that case study.

African-American borrowers are 34 percent more likely to receive higher-rate subprime loans than whites, even when credit risks are equal, according to a 2006 study by the Center for Responsible Lending. United for a Fair Economy puts the foreclosure loss for African-Americans at $122 billion and the loss for Latino homeowners at $129 billion – and the figure still is rising.

As more cities press forward on lawsuits against companies that they say engaged in deceptive and discriminatory lending practices, some people are asking a troubling question: What were federal investigators doing as the crime of the century unfolded?

Chaka Fattah, a Democratic congressman from Philadelphia, PA., is among those demanding answers. In August of 2008, Fattah wrote a letter to the FBI expressing his concern that the agency had waited too long to address the criminal activities and fraud contributing to the financial crisis.

“I am requesting that your office conduct a formal investigation concerning the lack of resources allocated to the FBI’s criminal investigations unit regarding mortgage fraud,” he wrote.

It was in fact the FBI that had warned the public earlier of these dangers. In 2004, Chris Swecker, the FBI official in charge of criminal investigations, told reporters that mortgage issues and fraud had the potential to be an “epidemic.”

“We think we can prevent a problem that could have as much impact as the Saving and Loan crisis,” said Swecker, who has since left the FBI and declined to discuss the issue with media.

With alarm bells sounding, why didn’t the FBI put more agents on the case?

Fattah had that question in mind when he wrote to Robert Mueller, director of the FBI, last summer.

“Reports that agency officials knew of a growing crisis, but failed to provide adequate resources to investigate unscrupulous mortgage companies have left millions of homeowners in the regrettable position of foreclosure,” Fattah said. 

“Across the nation, 1.5 million American families are struggling to satisfy their mortgage obligations. Many of these homes are now facing imminent foreclosure. According to officials within the FBI, the present mortgage crisis was predictable. Failure to avert the mounting predicament was due to a lack of personnel dedicated to probe questionable lender procedures,” Fattah asserted.

“Instead, the agency had its focus on countering terrorism when all the while domestic terrorism was at the doorstep of every American household.”

A new research project offers greater insights into the criminal activities that received priority and attention during the Bush Administration. Data compiled by a Syracuse University research group, TRAC, show that the number of new immigration prosecutions rose quickly, in part because DOJ officials felt they would strengthen their fight against terrorism.

In Sept. 2008, the most recent month for which data is available, TRAC reports a total of 11,454 immigration prosecutions in federal courts, representing an increase of over 700 percent from the same month seven years ago. During the first 10 months of 2008, the federal government filed 151 criminal mortgage fraud cases. Because of normal court delays, officials said that only 37 cases were completed in the same ten-month period.

During the first year of President Bush’s first term (FY 2001), the proportion of cases categorized as involving immigration violations was 18 percent of federal filings –  similar to the proportion in the final years of the Clinton administration. By FY 2004, the first year of Bush’s second term, that proportion had increased to over 31 percent. In the just-ended, however, immigration filings jumped to 51 percent of the total.

In addition, TRAC reported that over the last five years white-collar prosecutions fell 18 percent, weapons prosecutions dropped by 19 percent, organized crime prosecutions declined 20 percent and public corruption prosecutions dropped by 14 percent. 

The Los Angeles Times published an article last August questioning the DOJ’s “tepid” response to the mortgage fraud alerts issued by its very own investigators. Sources told the newspaper that personnel probing mortgage issues were reduced even further after top investigators sounded the alarm.

In 2007, the number of agents pursuing these issues shrank to around 100, the newspaper reported. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the Saving & Loans bust of the 1980s and ’90s.

Over the last several years,  municipalities and state attorney generals have begun launching their own crusades seeking justice for homeowners and punishment for enterprises and individuals who engaged in predatory lending, racial discrimination, scams, deceptive practicies and fraud.

Cleveland, Baltimore, Buffalo and Minneapolis are among those cities that already have sued lenders. Shelby County and City of Memphis officials are moving forward with legal action. Last week, the Memphis City Council mirrored the step taken by the Shelby County Board of Commissioners by approving a lawsuit targeting companies engaged in unscrupulous activities.

The City Council resolution states that deceptive and discriminating practices have caused substantial and irreparable harm to neighborhoods and tax coffers. City and county elected officials seek help in managing the damage left behind.

Memphis Area Legal Services is working with the City of Memphis and Shelby County on its lawsuits. Webb Brewer, the director of advocacy and general counsel, is confident some of the losses can be recovered.

“I guess the one wild card at this point is (that) some of the worst offenders, in terms of the national lenders, have either collapsed or been taken over by other companies like Bank of America. So that would be in my mind the primary limitation right now of what might be recovered,” said Brewer.

Several recent studies have sought to put a dollar figure on the damages and losses, Brewer said. One of them, he said, puts the financial loss for municipalities at between $20,000 and $30,000 for a single foreclosure.  Research shows property values for homes located near foreclosed property are likely to decline, which lowers tax revenues. In addition, municipalities often have higher costs associated with police and fire calls and code enforcement issues.

“I looked at another study recently that said there are like 24 municipal functions in every foreclosure. If you start counting them up – a lot of times it may be a code inspector going out and filling out a report – there are costs associated with each of those things. Looking at the tens of thousands of foreclosures that we are seeing it becomes kind of staggering.”

While critics contend that DOJ officials were too slow in responding to the crisis, the department has stepped up investigations over the last year.  In 2008, the Department of Justice and the Federal Bureau of Investigation (FBI) launched a national operation to target criminals involved in mortgage fraud schemes. From March 1 to June 18, Operation Malicious Mortgage resulted in about 144 mortgage fraud cases in which 406 defendants were charged.  The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

“Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation’s housing market and to the peace of mind of millions of American homeowners,” said Deputy Attorney General Mark R. Filip in announcing the action.

“Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department’s commitment and determination to combat these criminal schemes hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets.”

In addition, Lawrence J. Laurenzi, acting United States Attorney for the Western District of Tennessee, said his office recently formed a mortgage fraud task force.

“We view this as one of our five top priorities. We have recently formed a mortgage fraud task force that is being funded by the FBI. They are funding positions that are being staffed both by the Memphis Police Department and the Shelby County Sheriff’s Office, as well as the FBI, and other federal investigative agencies.

“During 08 we had four indictments on mortgage fraud. I’m trying one in the middle of February in Jackson. These are very complex cases and they are extremely labor intensive,” said Laurenzi. “It takes a great deal of manpower to review all of the loan documents as well as all the bank records that these mortgages generate.

We are receiving cases weekly that we are opening up and we are going to spend the resources and the time to see that they are properly investigated. And those people who we can make cases on we intend to present it to a grand jury and to seek that they are prosecuted and held accountable.”

Still, the questions loom: Were limited federal resources used to target the greatest threats to national security? Did federal officials target the individuals and companies that were doing the most harm to their communities? Could more have been done earlier?

Laurenzi said he could not speculate, adding that “so many things precipitated this.

“I truly do not see it as a problem, where the investigations were not done. Of course any area could use additional resources. But I don’t think that was a major component in the problem that we are facing.”