Mortgage fraud on the rise: who are the real losers?
Filed under: Real Estate, Ripoffs and Scams, Fraud
The FBI says that 2008 is shaping up to be a "record year" for mortgage fraud, with nearly 30,000 "suspicious activity reports" filed in the first half, compared with 46,000 for all of 2007.
According to the New York Times, "the biggest surge in federal law enforcement activity has focused on "fraud for profit" schemes, in which mortgage insiders - appraisers, real estate agents, loan officers, and lawyers - often work in teams. They falsely inflate a home's value, get a huge mortgage to buy it (usually using false identities), split the profits, and then disappear."
And then there are the more plain vanilla, less conspiratorial forms of mortgage fraud, including inflating income on loan applications, a practice that appears to have been encouraged at JPMorgan. The TowerGroup reports that lenders will lose about $2.5 billion to mortgage fraud this year.
As with many forms of crime, the victims of mortgage fraud included pretty much anyone who wasn't participating: banks have to increase fees to cover the cost of losses to fraud, and loans made to people who lied about their finances flushed funny money into the system, inflating property values and pricing many first-time home buyers out of the market. It's like trying to compete with Flinstones Chewables in a league where everyone else is on steroids. The extent to which mortgage fraud played a role in the housing bubble remains to be seen, but it's likely that fraud and lax lending practices were a substantial drivers of soaring home prices.
Another angle on this: because people used mortgage fraud to buy homes they couldn't really afford (If they could really afford them, there would have been no need to lie!), there's a good chance that many of the people who stand to benefit from plans to "help" homeowners facing foreclosures engaged in fraud to acquire their homes.
According to the New York Times, "the biggest surge in federal law enforcement activity has focused on "fraud for profit" schemes, in which mortgage insiders - appraisers, real estate agents, loan officers, and lawyers - often work in teams. They falsely inflate a home's value, get a huge mortgage to buy it (usually using false identities), split the profits, and then disappear."
And then there are the more plain vanilla, less conspiratorial forms of mortgage fraud, including inflating income on loan applications, a practice that appears to have been encouraged at JPMorgan. The TowerGroup reports that lenders will lose about $2.5 billion to mortgage fraud this year.
As with many forms of crime, the victims of mortgage fraud included pretty much anyone who wasn't participating: banks have to increase fees to cover the cost of losses to fraud, and loans made to people who lied about their finances flushed funny money into the system, inflating property values and pricing many first-time home buyers out of the market. It's like trying to compete with Flinstones Chewables in a league where everyone else is on steroids. The extent to which mortgage fraud played a role in the housing bubble remains to be seen, but it's likely that fraud and lax lending practices were a substantial drivers of soaring home prices.
Another angle on this: because people used mortgage fraud to buy homes they couldn't really afford (If they could really afford them, there would have been no need to lie!), there's a good chance that many of the people who stand to benefit from plans to "help" homeowners facing foreclosures engaged in fraud to acquire their homes.
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Reader Comments (Page 1 of 1)
4-08-2008 @ 2:50AM
Barbara Ann Jackson said...
re: Debt Collector Foreclosure Fraud
REAL “Foreclosure Fraud” happens when DEBT COLLECTOR ATTORNEYS intentionally file foreclosure cases naming defunct mortgage companies, companies having no ownership of promissory notes; or the collectors charge unfair FEES which are far beyond the "Acceleration Clause," impairing borrowers’ ability to repay arrears! If homeowners sue for "Unfair Debt Collection Practices," collectors make more $$ through protracted litigations. Additionally, some collectors file in Bankruptcy Court falsified motions to "Lift Stay" pleadings for purposes of accomplishing SIMULATED AUCTIONS of seized properties. [PROOF at: www.lawgrace.org.]
Despite the many probes into factors of the mortgage crisis, there has been almost no investigation of the most lethal mortgage mess component: DEBT COLLECTION ABUSE and JUDICIAL COLLUSION. The Feds need to seek the whereabouts of perhaps billions of dollars and massive amounts of real estate that winds up in the collector attorneys' possession -as well as examine the scores of attorney bankruptcy court frauds!
Real estate foreclosures are bonanzas of predatory and deceptive lending because these kinds of foreclosures enable PROPERTY FLIPPING, and enables Investors to be misled concerning housing market profits. FRAUDULENT FORECLOSURE causes SCORES OF PEOPLE TO LOSE OWNERSHIP OF THEIR PROPERTIES UNLAWFULLY. Even worse, some homeowners are being sued under "DEFICIENCY" judgments although the foreclosure itself is null.
WELLS FARGO and FREDDIE MAC greatly benefit from fraudulent foreclosures in States like Louisiana. For such reason, their Billion $$$ dollar losses associated with defaults on mortgages should be weighed against all the incredible needless that law firms earn from outmaneuvering -and even persecuting people who file court proceedings in opposition to FRAUDULENT foreclosures and repossessions.
Also, as an added measure to heighten judicial favor, collector attorneys propagate that defaulted property owners are costing their clients a lot of money, while the true culprit is collectors' fraud and racketeering. Exploiting distressed property owners for purposes of making money from their predicaments and then lying on them to the courts has to be the cruelest exploitation and maligning against people faced with becoming homeless!
EXAMPLE: For a purported debt of $86,000.00, through use of a non-existent mortgage company, attorneys racked up more than a QUARTER OF A MILLION DOLLARS in litigation fees. Later, that property was sold to a 3rd party for $37,000.00. Investors got nothing, nothing
practical was accomplished by evicting the homeowners, and neighborhood property values declined.
In Louisiana, Freddie Mac real estate fraud is truly bad! In fact, several years ago, former Rep. Richard Baker, R-La., said that Freddie Mac's activities was like "entering ENRON territory" and there was reason to "be gravely concerned." See:
www.cbsnews.com/stories/2003/06/09/national/main557688.shtml.
_____________________________________
Here's a few more links:
-Mortgage Mess, Foreclosure Fraud and Impediments to Justice
http://newsblaze.com/story/20071203130614tsop.nb/newsblaze/TOPSTORY/Top-Stories.
-COMMENTS: Foreclosure on Louisiana Judge Reginald Badeaux home; U.S. Attorney Jim Letten; FREDDIE MAC, WELLS FARGO Frauds; Collusion; etc.
www.lawgrace.org/2007/12/12/comments-foreclosure-on-louisiana-judge-reginald-badeaux-home-us-attorney-jim-letten-freddie-mac-wells-fargo-frauds-collusion-etc
-FREDDIE MAC -Peremptory, Declinatory Exceptions; Incorporated Memorandum
www.lawgrace.org/2007/06/13/freddie-mac-v-barbara-jackson-and-desiree-charbonnet-judge-piper-griffin-peremptory-exceptions-declinatory-exceptionsincorporated-memorandum/
Reply
4-10-2008 @ 7:25AM
MARY said...
Standing Ovation for: Barbara Ann Jackson. Excellent work !!
How DARE Zac Bissonnette even point a finger at the Home Owner !!!!!!
He says:
"Another angle on this: because people used mortgage fraud to buy homes they couldn't really afford (If they could really afford them, there would have been no need to lie!)"
Reply
4-10-2008 @ 9:07AM
MARY* said...
Standing Ovation for: Barbara Ann Jackson. Excellent work !!
How DARE Zac Bissonnette even point a finger at the Home Owner !!!!!!
He says:
"Another angle on this: because people used mortgage fraud to buy homes they couldn't really afford (If they could really afford them, there would have been no need to lie!)"
Reply
4-29-2008 @ 9:27PM
Anonymous said...
Mr. Bissonnette's article ends with the other angle about people getting liar loans that couldn't afford homes and shifts blame to the borrowers for the most part regarding the extensive mortgage fraud that is growing exponentially every month. What I think Mr. Bissonnette does not understand is that so many hundreds or thousands of borrowers truly didn't kow any better...
I am one of those 30,000 that have filed a SAR last year. Unfortunately, I was right smack dab in the middle of an investment mortgage scam and didn't know it myself for 6 months. The industry collapse and lender demises all of the sudden at the end of 06 and beginning of 07 sparked my interest. It led to me literally getting a clue and then investigating my own personal situation. Why do I have over 150 loans that I can't close? and of those that I HAVE closed, I have nightmares from... For real... nightmares. 40, 50-yr-old men and women crying and begging me to get back their $25000 or $33000 back. Why can't they get a HELOC on the SISA NOO 115% neg am ARM loan to get their investment back? "The program was $2000 down and that's it?" "Why am I out this much money?" "I'm going to lose everything I own!" "That 's my entire retirement plan, what am I going to do?" Approaching the mortgage company owner about the issues shortly before I left, I was given the explanation was that the borrowers are greedy little money-hungry investors. They deserve to get what they get, in the meantime, we're making money. End of conversation.
After my departure, the mortgage company became it's own lender being granted a warehouse line of credit posting the unlicensed commercial investments in the millions up for collateral. This I had knowledge of and was suspect although I only did residential loans... Apparently, they funded the 9 or 10 HELOCs themselves in addition to the other 100's of ABSOLUTELY fraudulent loans, also paying off pending lawsuits and paying back debt with the lines of credit granted which in turn has led to a slew of other lawsuits including an entry and detainer. As of this date, the lender's supervised lender license is not on file anymore with the State... I cannot get or obtain anymore information than I have been granted thus far. A phone call for my missing W2 and/or 1099 for last year was made and someone answered the phone, but I never returned the call or made the attempt to care anymore other than notifying who I needed to and being done with it. Seems the treachery is being exposed through the legal system and those that are due what they are due will get it eventually.
In the meantime, the borrowers, the banks, the stockholders, the rating agencies, the mortgage companies/servicing platforms, tax payers, EVERYONE loses eventually somewhere, somehow in the process and this is something that's nowhere near ending. This is going to tarry on well into 2009 possibly 2010 before the housing market even has a chance of stabilizing.
The current process of mortgage loan origination is going to completely change before this is over as well. There will be no more brokers. Period. Banks have been trying to convince the Federal government for years to close up the broker chains to gain their market share. I remember a stat a couple of years ago that brokers made up 89% of the originations for mortgages closed in one year... that's ENORMOUS. Seems natural for banks to be jealous... They eventually "partly" accomplished the goal through diversification in the origination through wholesale/retail/correspondent means but also through the funds and CDO sides as well - which has all blown up in their faces with the perfect storm of a credit bubble and housing market downturn. But, the saving grace is that the blame lies with the brokers who originated all of those loans and banks now have the "proof" they need to eventually convince everyone they need to and basically "nationalize" the mortgage industry. It may be a bold comment, I understand... but it seems very logical to me...
As for me, I was fortunate enough to be blessed with the opportunity to work at a credit union and doing Full Doc, FNMA and in-house HELOCs by the truckloads. It's been a year now and I'm still happy. The nightmares have finally ended and I'm sleeping peacefully.
Reply
4-30-2008 @ 3:10PM
Tracy Coenen said...
You aren't seriously suggesting that those who lied about their incomes to get their mortgages didn't know they were lying? Of course they did!