Posted on 02/22/2008 6:28:38 AM PST by AdamSelene235
In 2006, the FBI studied three million mortgage loans and found that 30 to 70 percent of early payment defaults can be linked to misrepresentations in mortgage loan applications.
The figures aren't really surprising when you consider the fact that most of the defaults occurring right now involve borrowers who have not yet seen a payment reset. It is blatantly obvious there were an overwhelming number of borrowers approved for mortgages they could not afford.
The only way for this to happen was for someone to lie on a mortgage application. Some media stories have implied that it was lenders who did the lying and that most borrowers are victims of predatory lending schemes.
The truth is that borrowers did their fair share of lying too. More than 40 percent of subprime borrowers received loans without having to document their ability to pay. The borrowers simply 'stated' their income on the mortgage applications.
Almost 60 percent of stated-loan applicants inflated their incomes by at least 50 percent, according to the Mortgage Asset Research Institute. The worst part is that everyone knew the income was being inflated. The industry even had a name for these kinds of loans--'liar's loans.'
FBI Barking Up the Wrong Tree
Although lying on a mortgage application is a federal crime, borrowers who committed mortgage fraud are low on the FBI's list of priorities. Joseph Schadler, an FBI spokesman, said investigators will be focusing on organized property flipping rings and bogus foreclosure rescue schemes instead of lying buyers.
'We're going to pick the ones that are the most egregious and have the greatest impact on the economy,' Schadler said. 'Fraud for property is less impactful on the economy than the speculative fraud where people are trying to flip homes for profit.'
Time out.
The FBI had better run the numbers again. Borrowers who committed fraud by lying on their mortgage application could cost this country trillions of dollars.
There are plans to allow lying borrowers to refinance loans they cannot reasonably afford through federally sponsored mortgage programs implicitly backed by taxpayers. Presidential candidates are talking about robbing taxpayers to help lawbreakers and other homeowners who are facing foreclosure.
The impact to the economy will be enormous and beyond any effect created by a foreclosure rescue scam or house flipping ring.
States Not as Lenient
Although the FBI has no intention of enforcing federal laws, borrowers may not be able to get away with lying much longer if some states have their way.
In Texas a new state law was passed last year that holds borrowers accountable for the information supplied on mortgage applications. Borrowers are required to swear that all of the information they supply is correct.
Lenders who suspect they are being lied to are required to report borrowers to new task forces that are being set up specifically for this purpose. Borrowers who are reported will have no idea what is going on until it is too late because lenders are not allowed to notify borrowers that the task force has been contacted.
Borrowers who are caught lying or inflating income could face up to 99 years in jail and a $10,000 fine.
There's that magic word again.
Only children and socialists believe that all "change" is good.
Adults know better.
Funny!...Now the FBI has nothing else to do?
Funny!...Now the FBI has nothing else to do?
One liar might not be Enron or WorldComm, however, the enormity of the numbers indicate the fraud is equivalent to all the early 2000 scandals. If prosecution is good enough for Ken Lay, it is good enough for mortgage cheaters.
oh heck give the liars amnesty, family values don’t stop at lying or the Rio Grande. They were just trying to better themselves at loan companies and now taxpayers expense, Americans can pay for it whats another trillion in taxes? Crap give them a new car and free health care while we are at it.
Yes, and people have been burglarizing homes for thousands of years......and we've throwing their butts in jail for thousands of years.
How fricking telling is this? The nanny state is so out of control that honest hard working tax paying citizens will have to bail out criminals.
That's not a very smart statement. I would imagine the person they did charge could file an equal protection claim. Why is a homebuyer's fraud different from a house flipper's fraud? If the fraud is for a $500K house, does it really matter if it was a homeowner or a flipper?
Add:
Schedule D Laws: Enforced against US Citizens but not against illegal aliens.
Jack
Of course the FBI isn’t going to go after them. All the feds are asking is that if you did lie on your mortgage that you notify them where you are so that President Obama or Clinton can send you a check for the hassle you endured during your foreclosure and eviction./s
Lying on the loan form is just like stealing. A bank loans you money based upon your lies. If you fail to make payments, the bank is out money in lost payments, foreclosure costs, and often, failure to receive enough in the sale to recoup the amount of the loan.
I guess writing hot checks is okay too?
The absolute worst part about this is the loss of income that the criminal attorneys are enduring.
So....we are going to ignore the root of the problem, and then offer these same liars an opportunity to refinance a mortgage that they still cannot afford to pay.
And then what happens when they default on that loan as well?
So really, we’ve just all jumped on a never-ending merry-go-round at the expense of honest people.
Yes. Many people have gone to prison for lying on mortgage applications. For some reason the government doesn't want to do it anymore. Wonder why?
***The brokers with a high rate of fraud should be stung with phony borrowers, to see what they do to encourage defrauding the lender.***
Absolutely! Too many house buyers are totally out of the loop about getting a mortgage, and are dependent on the brokers for advice. When they’re told to report their income as higher than it is because the banks expect it, they take the “experts” advice.
No. Lying on a form is not just like stealing.
Too bad for the banks. It’s too easy to verify the information. The bank is supposed to be doing that anyhow. I have no sympathy for the banks. Tough for them. Tough for the govt.
Due to a shortage of translators, no doubt....
borrower can lie
mortgage broker don't ask, don't tell = lie
appraiser certifies information provided and the appraiser is on the hook!
What a deal and for a mere $300....
I do some RE investing on the side.
The only difference between a liar loan and a full doc loan, as far as I experienced, was about a point of interest.
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