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.
Why not? It's bank robbery without the gun...and perjury. Martha Stewart went to prison for less.
Congress has their panties in a bunch over professional baseball players using steroids. Why should the FBI be held to a high level of accountability?
The FBI is involved because you and I (federal taxpayers) are going to bail these crooks out with money confiscated from our paychecks by the caring politicians.
The government doesn't have any money. They get it by taxing our paychecks. I'm not willing to sit idly while my pocket is picked by thieves who lie on mortgage applications.
We are the government. We pay for the fraud.
And, frankly, dishonesty is dishonesty, no matter whether someone verifies your lies or not.
Lying to obtain a loan is bank fraud. It is against the law:
18 USC 1041
Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the Farm Credit Administration, Federal Crop Insurance Corporation or a company the Corporation reinsures, the Secretary of Agriculture acting through the Farmers Home Administration or successor agency, the Rural Development Administration or successor agency, any Farm Credit Bank, production credit association, agricultural credit association, bank for cooperatives, or any division, officer, or employee thereof, or of any regional agricultural credit corporation established pursuant to law, or a Federal land bank, a Federal land bank association, a Federal Reserve bank, a small business investment company, as defined in section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 662), or the Small Business Administration in connection with any provision of that Act, a Federal credit union, an insured State-chartered credit union, any institution the accounts of which are insured by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, any Federal home loan bank, the Federal Housing Finance Board, the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Farm Credit System Insurance Corporation, or the National Credit Union Administration Board, a branch or agency of a foreign bank (as such terms are defined in paragraphs (1) and (3) of section 1(b) of the International Banking Act of 1978), or an organization operating under section 25 or section 25(a) [1] of the Federal Reserve Act, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. The term “State-chartered credit union” includes a credit union chartered under the laws of a State of the United States, the District of Columbia, or any commonwealth, territory, or possession of the United States.
Interesting --- that's a lot of loans to study. I wonder how and why they did this?
Let's say you went to a car dealership looking for an affordable sedan and the 'finance' guy got you into a Cadillac Escalade for the same payment. Would you drive it off the lot? He's working on commission, btw.
What's missing is a reverse-commission, where if the loan goes sour, you pay the lender back the fee you were paid to create it. That would put an end a lot of this.
What other business can you screw-up and pass it on to someone else without any accountability? (government doesn't count- it's a given)
Yep, you do get it...
That is exactly the type of thing I am talking about.
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