The Center for Public Integrity

Housing counselors at Western Tennessee Legal Services were plenty busy, even before one of the region’s largest employers, a Goodyear tire factory in tiny Union City, shut its doors in July.

The plant closing, which put nearly 2,000 employees out of work in a rural part of the state, meant more work for counselors like Emma Covington. Covington said she already takes 18 to 20 calls a day and meets in person with people who need counseling on foreclosures and other housing issues.

Now, like many of its clients, the legal nonprofit will have to make do with less.

Earlier this year, Congress defunded the $88 million grant program administered by the U.S. Department of Housing and Urban Development that helped support more than 7,500 housing counselors across the country, including those at Western Tennessee. Funds run out Sept. 30.

The cuts come at a terrible time, say counseling advocates.

In the second quarter of 2011, more than 3.4 million home mortgages nationwide were 90 or more days delinquent or in the foreclosure process. More than one in five mortgage borrowers owe more on their mortgages than their homes are worth, according to government data.

The counseling money may not be coming back. The House Appropriations Committee recently approved a budget for 2012 that also doesn’t include any HUD housing counseling dollars. A group of senators is trying to restore funding, but even if successful, it is unlikely that funds will reach counselors before next spring, at the earliest.

The looming gap in funding and continued uncertainty about the program’s future means layoffs and reduced hours for counselors at nonprofits across the country at a time when demand for their services is greater than ever.

A deputy sheriff in Olathe, Kan., ticketed race car driver Scott Tucker late one night in October 2008 after clocking Tucker’s Mercedes-Benz CLS63 going 86 mph in a stretch of Interstate 35 posted at 60 mph.

Editor's note 12/2/11: Eileen Foster, the fraud sleuth profiled in iWatch News' "Great Mortgage Cover-Up" series, appeared on CBS News' "60 Minutes" on Sunday night (12-4-11). In a two-part story published Sept. 22-23, iWatch News staff writer Michael Hudson reveals how Foster, Countrywide Financial Corp.'s fraud investigation chief, uncovered massive fraud within the company and, federal officials say, paid a price for doing so.

In the summer of 2007, a team of corporate investigators sifted through mounds of paper pulled from shred bins at Countrywide Financial Corp. mortgage shops in and around Boston.

By intercepting the documents before they were sliced by the shredder, the investigators were able to uncover what they believed was evidence that branch employees had used scissors, tape and Wite-Out to create fake bank statements, inflated property appraisals and other phony paperwork. Inside the heaps of paper, for example, they found mock-ups that indicated to investigators that workers had, as a matter of routine, literally cut and pasted the address for one home onto an appraisal for a completely different piece of property.

Eileen Foster, the company’s new fraud investigations chief, had seen a lot of slippery behavior in her two-plus decades in the banking business. But she’d never seen anything like this.

“You’re looking at it and you’re going, Oh my God, how did it get to this point?” Foster recalls. “How do you get people to go to work every day and do these things and think it’s okay?”

More surprises followed. She began to get pushback, she claims, from company officials who were unhappy with the investigation.

A high-level executive who reported corrupt lending practices at Countrywide Financial Corp. was improperly fired for leading internal investigations that “revealed widespread and pervasive wire, mail and bank fraud” at the lender, a federal agency ruled Wednesday.

The Labor Department ordered Bank of America Corp., which bought Countrywide, to pay the former executive roughly $930,000 and reinstate her.

Eileen Foster, who worked as a vice president at Countrywide and then at Bank of America after it acquired Countrywide in 2008, claimed that high-level executives at Countrywide covered up fraud within the company. She said whistleblowers who tried to report forged documents, faked data and other questionable activity inside the nation’s largest mortgage lender were fired.

Foster ran Countrywide’s mortgage fraud investigation unit at the time of the merger. In a series of interviews with iWatch News, Foster said Countrywide’s management protected sales staffers who inflated borrowers’ incomes on loan applications and falsified paperwork in order to push through a high volume of risky mortgages.

“The organization built its business to take advantage of the fraud,” Foster said. “It benefitted from the fraud. And it protected the fraud.”

Asked Wednesday about the labor agency’s decision, Foster said, “I don’t want to comment at this time, considering that I may be returning to Bank of America as an employee.”

Bank of America said it plans to appeal the ruling.

“This is an old matter dating from 2008,” bank spokeswoman Shirley Norton said. “We are disappointed with the ruling and plan to exercise our option to challenge the order.”

Under whistleblower-protection provisions of the 2002 Sarbanes-Oxley corporate reform law, Bank of America has 30 days to file an appeal with a Labor Department administrative law judge.