The U.S. government has been so busy putting out economic fires, that it seemed it might never revisit the mortgage debacle. Now, however, the Obama administration has begun to make it clear that fraud in the housing system will no longer be tolerated. Government prosecutors are targeting Allied Home Mortgage in a suit claiming the company misled the government into backing home loans that were so poor that approximately 1 out of every 3 loans defaulted. The suit seeks triple fines and damages to be levied on the mortgage company to compensate the Department of Housing and Urban Development for the $834 million dollars it lost.

Government Crackdown

While the government was forced to bail out “too big to fail” companies, it may not have had enough time or resources to prosecute every mortgage company that was issuing bad loans. However, it appears the government is now getting down to business, beginning a trend of trying to establish fault for tax payers losses by suing either the banks or home mortgage companies complicit in the “reckless lending” climate that led to the housing crisis. About six months ago Deutsche Bank was also sued by the government in a similar fraud case. The government is not only trying to recover losses, but also seeks to assign blame to chief executive officers named as defendants in fraud cases.

Too Late for Millions of Homeowners

While the cost of the home mortgage defaults is being debated in court, foreclosures continue at a ferocious pace. Suing banks and mortgage lenders that instituted a culture of corruption that led to severe economic consequences for millions of homeowners is essential to restoring the integrity of the system. However, it will be too late for many homeowners who ended up paying the price for loose federal regulation and easy lending during the boom periods.