3 ms·

The "bankers" (and by that I mean the entire mortgage chain, from issuing to securitizing) were engaged in fraud. Mortgage officers directed applicants to lie o

by steveax 11y ago

The "bankers" (and by that I mean the entire mortgage chain, from issuing to securitizing) were engaged in fraud. Mortgage officers directed applicants to lie on their applications (and in some cases falsified numbers themselves) [1][2], falsified appraisals [3], misrepresented the quality of the loans that made up the RMBS they were selling to others [4][5] and then falsified mortgage documents for foreclosure purposes [6]. What's not to hate? Episode 365 of This American Life, The Giant Pool of Money [7] is a good place to start for more context of the hate. [1]: http://www.businessinsider.com/only-lying-lenders-made-liars-loans-2011-3 http://www.businessinsider.com/only-lying-lenders-made-liars... [2]: http://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-made-the-financial-crisis-worse.html http://www.nytimes.com/2015/02/13/upshot/how-mortgage-fraud-... [3]: http://www.bergermontague.com/blog/index.php/countrywide-whistleblower-receives-14-5-million-in-mortgage-fraud-case/ http://www.bergermontague.com/blog/index.php/countrywide-whi... [4]: https://www.washingtonpost.com/business/economy/bank-of-america-ordered-to-pay-damages-of-127-billion-for-countrywide-fraud/2014/07/30/d62faa0c-1813-11e4-9349-84d4a85be981_story.html https://www.washingtonpost.com/business/economy/bank-of-amer... [5]: http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-... [6]: http://www.nolo.com/legal-encyclopedia/false-affidavits-foreclosures-what-robo-34185.html http://www.nolo.com/legal-encyclopedia/false-affidavits-fore... [7]: http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money http://www.thisamericanlife.org/radio-archives/episode/355/t...

MichaelBurge 11y ago
It's clear fraud to lie on an application. I could see charging every single such applicant with fraud. I could also see charging many of the mortgage officers with fraud for falsifying related documents. It's not clear that the appraisers are doing any criminal activity. I read this: "In the lawsuit, the couples claim prospective home buyers were presented with false or misleading data on previously sold homes in order to justify higher asking prices on new purchases." If that's all they were doing, that's not really fraud. HUD should be encouraged to run its own appraisal process on 1% of the received appraisals in order to refine its process. It's harder to charge the managers in charge of the officers with fraud: They could easily have taken steps to ensure that they weren't aware of any specific fraud on any specific application, even if they generally knew what was going on. I'm sure the prosecutors could find a way, though. However, it ceases to be fraud for anyone except for the companies immediately processing the mortgage: If they sold the note to a bank, parent company, or to investors, that bank or investor should be off the hook. So I don't yet see any crimes for the people who profited the most(the banks who outsourced mortgage processing to smaller companies).
- giaour 11y ago
  The TL;DR of the whole crisis is that some high-level financial professionals found a loophole in the way risk was calculated and then applied pressure on their subordinates to create more of the raw materials necessary to exploit that loophole. Maybe you don't believe that's criminal, but financial crimes are often cases where the victim "should have known better." Enron's deception was apparent to industry insiders long before it was raided and shut down, but that doesn't mean No crime was committed.
- newman314 11y ago
  Also, robosigning... https://en.wikipedia.org/wiki/2010_United_States_foreclosure_crisis#Robo-signing_controversy https://en.wikipedia.org/wiki/2010_United_States_foreclosure... The banks literally f*cked you both ways, first, issuing bad subprime loans, then robosigning and foreclosing on your home.
  - TuringNYC 11y ago
    It is shocking how they got away without criminal charges on the whole robosigning scandal. It makes a mockery of our legal system when due process is so recklessly mangled.
- steveax 11y ago
  However, it ceases to be fraud for anyone except for the companies immediately processing the mortgage: If they sold the note to a bank, parent company, or to investors, that bank or investor should be off the hook. So I don't yet see any crimes for the people who profited the most(the banks who outsourced mortgage processing to smaller companies Perhaps you missed this from the BofA (Merrill Lynch) settlement [1]: As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.” In short, they knew the loans they were bundling were crap and they lied about it to the folks buying the bundled mortgages. [1]: http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-...

by steveax 11y ago

MichaelBurge 11y ago

It's clear fraud to lie on an application. I could see charging every single such applicant with fraud. I could also see charging many of the mortgage officers with fraud for falsifying related documents. It's not clear that the appraisers are doing any criminal activity. I read this: "In the lawsuit, the couples claim prospective home buyers were presented with false or misleading data on previously sold homes in order to justify higher asking prices on new purchases." If that's all they were doing, that's not really fraud. HUD should be encouraged to run its own appraisal process on 1% of the received appraisals in order to refine its process. It's harder to charge the managers in charge of the officers with fraud: They could easily have taken steps to ensure that they weren't aware of any specific fraud on any specific application, even if they generally knew what was going on. I'm sure the prosecutors could find a way, though. However, it ceases to be fraud for anyone except for the companies immediately processing the mortgage: If they sold the note to a bank, parent company, or to investors, that bank or investor should be off the hook. So I don't yet see any crimes for the people who profited the most(the banks who outsourced mortgage processing to smaller companies).

giaour 11y ago
The TL;DR of the whole crisis is that some high-level financial professionals found a loophole in the way risk was calculated and then applied pressure on their subordinates to create more of the raw materials necessary to exploit that loophole. Maybe you don't believe that's criminal, but financial crimes are often cases where the victim "should have known better." Enron's deception was apparent to industry insiders long before it was raided and shut down, but that doesn't mean No crime was committed.
newman314 11y ago
Also, robosigning... https://en.wikipedia.org/wiki/2010_United_States_foreclosure_crisis#Robo-signing_controversy https://en.wikipedia.org/wiki/2010_United_States_foreclosure... The banks literally f*cked you both ways, first, issuing bad subprime loans, then robosigning and foreclosing on your home.
- TuringNYC 11y ago
  It is shocking how they got away without criminal charges on the whole robosigning scandal. It makes a mockery of our legal system when due process is so recklessly mangled.
steveax 11y ago
However, it ceases to be fraud for anyone except for the companies immediately processing the mortgage: If they sold the note to a bank, parent company, or to investors, that bank or investor should be off the hook. So I don't yet see any crimes for the people who profited the most(the banks who outsourced mortgage processing to smaller companies Perhaps you missed this from the BofA (Merrill Lynch) settlement [1]: As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.” In short, they knew the loans they were bundling were crap and they lied about it to the folks buying the bundled mortgages. [1]: http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-department-settlement-financial-fraud-leading http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-...