The First Bank Has Been Criminally Indicted for Mortgage Fraud

[ljm2002]

38. Liars' Loans were usually initiated by the LENDERS...

...and often (but not always), the borrowers were not aware of the lies perpetrated in their names:

http://www.dailyfinance.com/2011/01/18/making-a-liars-loan-with-help-from-the-loan-officer/

On Sept. 25, 2006, aspiring borrower faxes Marc Bristol, senior loan officer of JPMorgan Chase Home Mortgage, regarding a mortgage application:

"I have the following concerns with the documents you sent me:

(1) I do not make $34,000 a month or anything close to this figure. I am not comfortable signing a document with a number I can not document in some form.

Please notice, the borrower (in this case, a fairly sophisticated borrower) expressed concerns when the lender sent him a copy of the loan application that seriously misstated his income. In other words, just so you don't miss it, it was the loan officer and not the borrower who initiated the false information.

http://www.huffingtonpost.com/william-k-black/lenders-put-the-lies-in-l_b_780521.html

William Black notes that the subprime lenders routinely failed to file any of the required SARS reports:

The typical nonprime lender deliberately violates its legal requirement to file a criminal referral when it discovers mortgage fraud even though that practice would be irrational for an honest lender. The federal regulatory agencies have not taken any effective action against these pervasive violation of their rules despite an "epidemic" of mortgage fraud that drove the ongoing financial crises.

Hi also notes that insiders are involved in 80% of the fraud:

The FBI, however, reports that 80% of mortgage fraud losses occur when "industry insiders" are involved in the fraud (FBI 2007).

http://www.huffingtonpost.com/william-k-black/post_1243_b_781593.html

He also blasts the idea that it was the unsophisticated borrowers who precipitated this crisis:

It strains all credulity to think that millions of working class Americans managed to defraud financially sophisticated lenders.

It is even more absurd to believe that honest lenders, finding themselves the victims of an epidemic of mortgage fraud by these clever working class Americans, responded by (1) massively expanding the number of liar's loans they made, (2) spreading them to subprime borrowers with severe credit defects, (3) made defaults on the loans, and the loss upon default, far greater by layering risk and inflating appraisals, and (4) slashed their allowances for losses (ALLL) to trivial levels to ensure that the inevitable fraud losses would cause catastrophic losses.

Investigations, to date, have confirmed this logic. The fraudulent nonprime lenders and brokers typically initiated, directed, and sometimes even directly created the lies on the liar's loans.

Again, he notes the massive amounts of fraud involved (which means the lenders had to have known), and again he notes that the fraud was most often initiated by the lenders:

A review of 100 stated income loans by one lender found that a shocking 90% of the applications overstated income by 5% or more and almost 60% overstated income by more than 50%. Importantly, our investigations have found that most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.

And a couple of Black's remarks regarding Michael Hudson's book "The Monster":

Michael W. Hudson's new book, The Monster, reports on the results of numerous interviews with nonprime lenders. (He focused on Ameriquest.) Hudson reports that fraudulent nonprime lender personnel were compensated through perverse bonus programs that successfully encouraged them to do whatever it took to get liar's loans approved. That included forging the borrower's signature and changing information provided by the borrower to inflate income.

(emphasis mine)

Hudson also explains the tactics that loan officers use to intimidate borrowers to ensure that they did not read the false disclosures that the officers had fabricated.

Now please, do let us in on your inside knowledge of how lenders were never, ever to blame, and it was only those oh-so-crafty working class people who pulled the wool over the lenders' eyes. That's what caused this crisis, yep you betcha.

Gaak.