Mortgage Lawsuit Claims Banks Defrauded Military Vets

ATLANTA -- A whistleblower lawsuit launched in 2006 and unsealed Tuesday in federal court in Atlanta claims several large banks and mortgage companies defrauded military veterans and taxpayers out of hundreds of millions of dollars in a "brazen scheme" to hide illegal fees.

The lawsuit, brought under the Federal Claims Act by two mortgage brokers, claims the 13 banks and mortgage firms over-charged veterans who were applying for special home loans guaranteed by the Department of Veterans Affairs.

Federal rules allow the lenders to charge "reasonable and customary" fees and taxes, the lawsuit said, but they are barred from charging them attorneys' fees and settlement closing costs for the loans. The firms skirted the rules by charging attorneys' fees by hiding them as "title examination" or "title search" fees, it said.