3 ms·

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 i

by 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-...

MichaelBurge 11y ago
Okay, that's a pretty good resource. I will note that you're quoting a $17 billion fine that was redistributed to the people affected, but it sounds like the main contention is that nobody went to jail. It all seems plausible, so I can't fault investors for demanding that. Reading between the lines, I see that the Justice Department is most annoyed that the FDIC and government-sponsored Fannie Mae and Freddie Mac took the heat from these loans. I can see why the JD is motivated, but it does raise the question of why individuals all over are so angry. A couple reasons might be A.) There was an unpopular tax imposed to pay for the bailouts B.) People overpaid for their mortgages(I see that this settlement includes principle reduction on outstanding mortgages) or C.) Angry people are primarily investors in mortgage securities. I feel like A would've been mentioned by now. And C is unlikely because I don't think note investing is actually that common: Banks don't usually sell their mortgages to one-off investors, so you usually have to trick a really small local bank into giving you one to get into the club; and then you need the skills to be someone's 'lienlord'. So is the root cause of the anger B: People feel like they overpaid for their houses?

by steveax 11y ago

MichaelBurge 11y ago

Okay, that's a pretty good resource. I will note that you're quoting a $17 billion fine that was redistributed to the people affected, but it sounds like the main contention is that nobody went to jail. It all seems plausible, so I can't fault investors for demanding that. Reading between the lines, I see that the Justice Department is most annoyed that the FDIC and government-sponsored Fannie Mae and Freddie Mac took the heat from these loans. I can see why the JD is motivated, but it does raise the question of why individuals all over are so angry. A couple reasons might be A.) There was an unpopular tax imposed to pay for the bailouts B.) People overpaid for their mortgages(I see that this settlement includes principle reduction on outstanding mortgages) or C.) Angry people are primarily investors in mortgage securities. I feel like A would've been mentioned by now. And C is unlikely because I don't think note investing is actually that common: Banks don't usually sell their mortgages to one-off investors, so you usually have to trick a really small local bank into giving you one to get into the club; and then you need the skills to be someone's 'lienlord'. So is the root cause of the anger B: People feel like they overpaid for their houses?