RICO No Suave: What Tony Soprano and Your Mortgage Banker May Have in Common

Is your mortgage banker’s execution of rapid, rubber-stamp foreclosures the makings of a criminal enterprise?  Some plaintiffs and legal commentators think so.

Recent headlines have revealed that many of the largest banking institutions in the US may have, perhaps illegally, cut procedural corners to quickly foreclose on homeowners struggling to make their mortgage payments.  As a result of these shortcuts, the banks may have violated the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO.  RICO is law mostly associated with the prosecution of mobsters, but the statute has been used to nab high profile white-collar criminals and even to challenge Bud Selig and Major League Baseball.

A RICO violation occurs when a person or entity engages in a pattern of racketeering activity while conducting the affairs of an enterprise.  Racketeering activity includes any act or threat involving murder, kidnapping, or bribery as well as obtaining money or property by means of false pretenses while using the postal service or any private or commercial interstate carrier, i.e. mail fraud.  Any person harmed by a defendant’s RICO violation can receive three times the damages that person sustained.

Turning back to the mortgage crisis, some bank employees have revealed that they were instructed to rubber-stamp shoddy affidavits that were used in foreclosure hearings, a process commonly referred to as “robo-signing”.  These employees often attested that they were familiar with the facts related to the foreclosure when in fact they did not have the time to read the affidavits due to the sheer volume of foreclosures.  As result, some are claiming that the banks instructed their employees to falsify affidavits in order to fraudulent repossess property that the banks may not even own.  If it can be established that the banks engaged in a pattern of these fraudulent practices to obtain property, a RICO violation may have occurred. 

Sometimes a shakedown occurs from the barrel of a pen.