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The Structural Causes of Mortgage Fraud
University of Georgia Law School ^ | August 2010 | James Charles Smith

Posted on 08/14/2010 9:07:22 AM PDT by Chunga85

James Charles Smith University of Georgia Law School

Syracuse Law Review, Vol. 60 UGA Legal Studies Research Paper No. 10-14

Abstract:

Mortgage fraud, often a violation of federal and state criminal statutes, covers a number of different types of behavior, all of which have the common denominator of conduct that has the intent or effect of impairing the value of residential mortgage loans.

Mortgage fraud has become prevalent over the past decade and shows no signs of diminishing despite the collapse of domestic housing markets during the past two years. This paper analyzes the complex relationships between prime mortgage loan markets, subprime markets, and various types of mortgage fraud.

This paper concludes that the root causes of mortgage fraud are associated with the core institutional and structural components of mortgage markets, which cut across all types of residential mortgage products. The organizing principle is the historical evolution from proximity to distance within the mortgage market, which is explored along three axes. First, geographical distance between lenders and borrowers has replaced geographical proximity.

The mortgage market is national, with local lending institutions no longer making a significant proportion of the loans that are originated. Second, transactional distance has replaced transactional proximity. Lenders and borrowers have little direct contact; instead intermediaries such as mortgage brokers, appraisers, insurers, and closing officers, separate the principals. Third, financial distance has replaced financial proximity. Previously both borrowers and lenders had significant financial interests in the mortgage loan transaction. The borrower had equity in the property, and the lender held the loan in its portfolio.

Presently many borrowers have no equity (or negative equity) (due to fraud) in their homes, and due to the securitization of loans through the secondary mortgage market, few originating lenders retain a stake in the loans they create.

(Excerpt) Read more at scribd.com ...


TOPICS: Business/Economy; Crime/Corruption; Government; News/Current Events
KEYWORDS: foreclosurefraud; jamescharlessmith; mortgagefraud
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To: Chunga85

I’ve read mine and I found some tasty nuggets. (damn the PSA was 370 pages of fine print....)


21 posted on 08/14/2010 4:57:27 PM PDT by Neidermeyer
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To: Chunga85
>>Dumb bell homeowners just failed to read their loan docs,
 
Reminds me of a conversation I had one morning with a manager at Argent mortgage, during the time the E!mpower team was updating loan docs into Spanish - in compliance with a law recently passed in California...
"We're not predators.  It's not our fault if those illegal immigrants can't speak English, are uneducated, ignorant, and don't read what they're signing..."
 
With that kind of compass and level in mind, it's no wonder the resulting navigational knot is Gordian instead of square.
 
"everybody cheats... that's what you have to do to survive...."???
 
Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports. In vain would that man claim the tribute of patriotism, who should labor to subvert these great pillars of human happiness, these firmest props of the duties of men and citizens. The mere politician, equally with the pious man, ought to respect and to cherish them. A volume could not trace all their connections with private and public felicity...
---President George Washington's Farewell Adress;  1796
 
No.  Not everybody.

22 posted on 08/14/2010 5:03:59 PM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: Neidermeyer
>>originators faking data for income and such
FICO would be part of the "and such".
 
Weidner can ask the SEC.  Though they'll probably just tell him it's their policy not to comment on on-going...
Dear Mr. Lee:  I was previously employed by Argent Mortgage for two and a half years and managed, among other areas, the corporation's fraud investigation, borrower complaints and repurchase departments. There are currently over 568 open fraud investigations involving hundreds of brokers and hundreds of millions of dollars in fraudulent loans that are being covered up by top executives in the company. If a broker sustains a certain monthly volume, Argent management looks the other way and, not only does not suspend the bad brokers, but knowingly sells these fraudulent loans on the secondary market to unwitting investors.
  I was terminated today and left with just my purse in tow, but I have names of individuals in the company who need to be served with subpoenas to enable them to turn over their spreadsheets and boxes full of documentation and evidence of all the fraud they have found that is being covered up by Argent Mortgage's executive management. The state regulators need to know the truth about the blind eye Argent turns to the fraud perpetrated on innocent consumers by high volume brokers. They also need to be aware that Argent knowingly bundles these fraudulent loans and sells them as mortgage-backed securities on Wall Street, thereby compromising the SEC, as well as our country's economic stability.
  At a recent fraud seminar attended by hundreds of mortgage lenders in Washington D.C. a week ago, an attorney who works for Argent's retained law firm, Buchalter Nemer, stood up and told the seminar attendees that the wholesale lenders in the audience had better beware, unless their name is Argent. Argent is safe from investigation because the government got their $325 million settlement from Ameriquest and won't be looking into Argent, per the settlement agreement. I hope this isn't true because Argent Mortgage funded over $50 billion in 2005 and is gearing up to fund well over $80 billion dollars of fraudulent loans in 2007.
http://www.innercitypress.org/ameriquest.html
....or not, investigations.
 
 
>>as far as I have heard..
All those Superbowl Advertising $$ evidently still quietly at work...?
 
 
"We havn't CHANGEed the mortgage industry; We've REVOLUTIONized it"
--Argent Mortgage
 
 

23 posted on 08/14/2010 5:24:26 PM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: LomanBill

Irish Nuns, Investors Sue Morgan Stanley in London for Not Selling Notes
By Lindsay Fortado - Aug 11, 2010 7:01 PM ET

Morgan Stanley was accused of taking a profit for itself and failing to sell notes when it should have in a lawsuit filed by nuns, a veterinary fund and 85 other Irish investors.

Morgan Stanley and Saturns Investments Europe Plc, a special-purpose vehicle set up by the New York-based bank, “deliberately or carelessly failed to redeem the notes” when they were downgraded to junk in January 2009, according to a statement by Stewarts Law LLP, the lawyers for the investors.

The bank and Saturns waited until June 2009, after the price of underlying bonds had risen significantly, to redeem the notes, “thereby securing Morgan Stanley a profit of at least $11.2 million on the sale of the notes by way of a termination payment,” the lawyers said. The notes were sold to “a related Morgan Stanley entity” at a profit, they said.

The Sisters of Charity of Jesus and Mary, the Holy Faith Sisters, the Irish Veterinary Benevolent Fund and other individual investors bought 5.88 million euros ($7.6 million) of the notes through the stockbroker Bloxham in 2005 and 2006. The investors filed the suit on Aug. 10 in London, according to Stewarts Law. They are seeking damages of more than 15 million euros.

Morgan Stanley spokesman Michael Wang declined to comment.

The case is The Sisters of Charity of Jesus and Mary v. Morgan Stanley & Co, 2010/960, High Court of Justice, Queen’s Bench Division (London).

To contact the reporter for this story: Lindsay Fortado in London at lfortado@bloomberg.net.


24 posted on 08/14/2010 6:42:31 PM PDT by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
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To: Chunga85

Next week’s headline

Convent foreclosed. Gunned down Nuns now happily with their Savior.


25 posted on 08/14/2010 7:03:08 PM PDT by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
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To: Chunga85

Be interesting to see a breakdown of secular vs non-secular foundations and funds that were impacted - whether the merchant used his dishonest scales indiscriminately or... with an ideological / sectarian bias.


26 posted on 08/14/2010 7:05:56 PM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: Chunga85
which is explored along three axes.

Three axes? Is this what our Law schools are accepting these days?

27 posted on 08/14/2010 7:08:04 PM PDT by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: Lurker

Next week’s headline

Convent foreclosed. Gunned down Nuns now happily with their Savior.

Goldman Sachs Stock price up 10% on this GREAT NEWS


28 posted on 08/14/2010 7:36:19 PM PDT by American Bulldog777
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To: Lurker

Next week’s headline

Convent foreclosed. Gunned down Nuns now happily with their Savior.

Goldman Sachs Stock price up 10% on this GREAT NEWS


29 posted on 08/14/2010 7:36:29 PM PDT by American Bulldog777
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To: LomanBill

Another type of fraud that makes mortgage fraud look like the boy scouts... or more appropriately, makes mortgage fraud look like a dingy compared to the Titanic, is tax fraud.

“Everybody cheats” begins and ends with the tax code.

When comparing mortgage fraud to widespread tax fraud... there is no comparison.


30 posted on 08/14/2010 7:40:33 PM PDT by Painesright
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To: Painesright
IRS Form 938- I Have No Idea If This Is Important But It Sure is Curious: If you are interested in tax cheats Read this!
31 posted on 08/14/2010 8:10:14 PM PDT by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
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To: Lurker

“Three axes? Is this what our Law schools are accepting these days?”

Good catch there Lurker. That’s very compelling. Surely we can’t discount the urgent spelling errors, they’re equally to blame and a central element worthy of thoughtful consideration.

Until we seriously address the spelling crisis our financial sclerosis will only worsen.

Please keep up the good work.


32 posted on 08/14/2010 8:55:00 PM PDT by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
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To: Painesright
>>“Everybody cheats” begins and ends with the tax code.
 
"Report: Tax Noncompliance on the Rise Among IRS Workers"
http://www.webcpa.com/news/7812-1.html
 
Cheating and Gaming the system is just a symptom of the root disease: moral degradation.
 
 
When "do what thou wilt" does become "the whole of the law", bad stuff happens.

33 posted on 08/15/2010 10:14:47 AM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: Chunga85; Lurker
[“Three axes? Is this what our Law schools are accepting these days?”]
 
Axes is the correct plural form of Axis.
 
 
Main Entry: ax·is
Pronunciation: \ˈak-səs\
Function: noun
Inflected Form(s): plural ax·es \-ˌsēz\
http://www.merriam-webster.com/dictionary/axis
 
 
 

34 posted on 08/15/2010 10:23:46 AM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: Chunga85
Friend Chunga you miss my point. If that can't get simple, standard English correct what other flaws exist in their thesis?

It's sloppy.

35 posted on 08/16/2010 7:40:36 AM PDT by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: Lurker

Good call.


36 posted on 08/16/2010 12:20:18 PM PDT by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
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