“In reality it’s kind of funny though because they could probably convict 90% of homebuyers for inflating stuff on their home loan applications, but they usually don’t pay attractive until the losses get into the millions or there’s some sort outright fraud.”
Really? That would be really sad. When we used to get loans, it was ridiculous how much the bank said we were eligible to borrow. And we were completely factual on our application. I would never in a million years borrow the amount they said we could, because then we couldn’t afford any utility bills or furniture for the house! Much less food and clothing.
Of course I haven’t gotten the loan in over 15 years. Hopefully things have changed. I’m sure letting people borrow too much just leads the way to bankruptcies.
Really? That would be really sad. When we used to get loans, it was ridiculous how much the bank said we were eligible to borrow. And we were completely factual on our application.
Fortunately, they don't get many referrals for prosecutions as to mortgage fraud unless it's a huge scam with a bunch of falsified documents, straw buyers, inflated purchase prices where a bunch of money gets kicked back, etc. Developers and builders can get into hot water, too, if they draw money on loans for expenses not related to the project they said they were borrowing. There was a developer in St. Louis years ago that had drown like 80% of the money from his loan and when they went to look at the progress it was like 30% complete. He'd spent it on other stuff. In the Sanders deal, the loss is apparently so huge, they are taking a look at it. You will also see them prosecute people at Universities for falsifying applications for research grants and such. It doesn't get a lot of press, but it happens.
Were you not paying attention in 2007? Overlending was part of the foreclosure crisis. One woman came to me for help and when I examined her papers I could see that from the time she applied for the loan to the time it was actually granted, the balloon amount with Deutsche Bank had jumped from 10% to 12.5%. She lost the house. DB continues to be in trouble both financial and legal as explained in great detail in this link, and there is also a good timeline of the 2008 crisis.
The article reports that the European Union has enacted strong provisions so that 2008 does not happen to their entire banking system. We enacted provision for similar reasons and purpose. I don’t know how effective they have been, but the Republican plan is to get rid of them.
If you have not seen the movie “The Big Short” by all means do so. It is about two smart young guys who identified the pending lending crisis in 2007 and shorted a lot of stock on margin and made a fortune in 2008 when the market crashed.