Hundreds Swept up in Mortgage Fraud Arrests

Hundreds Swept up in Mortgage Fraud Arrests

abcnews.go.com
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Amazing. This is the largest white collar crime sting that I recall. But how much responsibility do the borrowers bear? It will be interesting to hear the actual list of charges this afternoon.

abcnews.go.com
(visit the link for the full news article)

Great find!

The scam was national - the players at every level from the banks to the 'licensed' real estate agencies.

Let's see who the fall guys will be.

Great post jsobecky.

I place a little less blame on the borrowers, and here is my reasoning.


Finance is fairly complicated in terms of the math, the contracts can be long, the calculations that are done can be confusing, particularly to someone who doesnt have a background in finance. The contracts, and the calculations CAN be explained in very simple terms to someone, and they generally are, however, in this translation from the complex to the simple and easy to understand there is a lot of room for the person doing the translating to spin the interpretation.

The lay person, generally speaking, has to trust that the person doing the explaining both knows what they are doing, and is not deliberating lying to them or misleading them. In the past, banks actually carried the loans themselves, (rather than quickly sell them to other financial institutions) and so the banks and other lenders had a vested interest in making damn sure the borrower wasnt getting in over their head. In the past, you could trust your lender to give you a pretty fair (in fact very conservative) idea what you could afford, and for years, that is exactly what people did. They trusted the professionals to tell them what they could and could not afford.

Admittedly, it would be ideal if all homeowners had a sold grasp of both math and finance, this simply isnt the case. Especially in the group of borrowers who are having the biggest problems now, they are in large at the very low end of the ability to be in a home at all, and are less likely to have great financial skill. So, while ideally they WOULD have known better, this knowing better isnt the case with a lot of things associated with home ownership. It would be ideal, for instance, if all homeowners also had a solid grasp of plumbing, but they dont. When a professional plumber tells you that you need some work done, you trust that person to know what they are doing, and that they are not just flat out lying to you. Same with doctors, same with electricians, same with any professional for the most part.

Some degree of trust is necessary when dealing with professionals who specialize in areas the average person knows little about. I dont blame the patient if a doctor tell them they have a certain disease, shows them bogus test results, and then fleeces them with false treatments. Most of us agree that that doctor should be prosecuted. I say it is no different with financial advisor's and lenders. The fault lies with the unethical professional, not the lay person who trusts them.

Let the Perp Walks begin. LOL

Also today 2 people who ran those Bear Sterns hedgefunds that blew up that helped get this whole mess started were indicted and arrested today. I'd love to see them turn states evidence, but realize they will most likely be just scapegoats.

Real Estate brokers and sales have become worse than a used car saleman. Theres so many differant ways to expand profit to the realy unsuspecting that its almost intolerable. Simple finance has never been tried. Try to just figure out exactly what your paying in interest when in a compound interest sales contract. I did it once. On a 285,000 home loan at 9% you pay after 30 years 3-4 times as much. No wonder people hate banks!!


Zindo

reply to post by Illusionsaregrander

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That is why they have these people called "attorneys", who go to school for a lot of years so that you can pay them to advise you and to look out for your best interest.

Saying that the borrower is not responsible for getting themselves into a bad loan situation is a cop out for people who want it all, then are dismayed when they cant afford to maintain a house that they probably couldnt afford to begin with. Typically these people fall in love with a house and will get it at any cost.

Yes there are bad and greedy people out there who are in the mortgage industry. But the majority of home owners who find themselves in trouble did it to themselves by over extending themselves. The actual fraud cases are a very very small percentage of what we are seeing with foreclosures.

There are already 150 different safety measures in place and compliance/disclosure requirements out the ying yang to make sure that borrowers are fully aware of what they are signing...it is the law. Everything is disclosed in plain English and every dynamic of that loan is presented to the borrower days and weeks before they ever sit down to close. There is even a full three day waiting period AFTER you sign the loan in which you can decide to back out for ANY reason, no questions asked.

Playing the ignorant card does not work. Are you telling me that you are competent enough to earn the money required to own a home, yet you are not smart enough to read provided documentation in order to make sure that you are doing due diligence on your own behalf? Why would you not hire an attorney to look it over for you? Why would you just "trust" some random loan officer out there when it comes to the largest investment of your life?

People just want someone to blame, but the reality is that nobody can force you into doing a loan that is not in your best interest. Someone eventually needs to take responsibility for their own actions instead of blaming other people for their plight. Where is the personal accountability?

Yeah they arrest people who followed the company rules... And I'm still waiting for the arrest of those responsable for the thief of over 3 trillions at the pentagon.

reply to post by BlackOps719

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I am not telling you or anyone that I do not know how to manage my finances. I actually do a damn fine job. I am quite solvent, thank you very much. When was the last time you hired an attorney to take out a home loan? Just curious. It is definitely NOT a common practice to have an attorney sit down with your loan officer in any state I have lived in. Might be different where you are, who knows.

I also think you need to remember that the people in the most trouble are the ones who have the least money, and probably couldnt afford the luxury of hiring an attorney just to interview their loan officers.

Stop blaming the victims on this one. Just because some people are admittedly less than able to look after their bests interests does not justify some predator coming in and taking advantage of that fact. It is an expensive lesson, not only for the people who directly got taken advantage of, but the rest of us as well. (America as a whole) We are all going to end up paying for this one. Did all the innocent bystanders (non sub-prime borrowers) who are being affected by this crisis do something to deserve this as well? Should they have had a lawyer sit down with them and advise them on how a bunch of predatory lenders were going to impact the economy as a whole?

[edit on 19-6-2008 by Illusionsaregrander]

reply to post by Vitchilo

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That is the part that bugs me about these arrests. I fear they are going to snag a bunch of low level workers, who needed that paycheck and were just doing as they were told. (Though that doesnt justify doing wrong if you know what you are doing is wrong) I am afraid they are going to let the people who set the whole game up skate off. As often is the case.

reply to post by Illusionsaregrander

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In my gut, I have to side with you. Owning a home is as much emotional as it is rational. It's the American dream, after all. I have no doubt that many buyers were talked into mortgages, told that they could afford to buy that house. And to the hard-working couple with kids, finally, their own back yard! Sure, Dad might just have to work a little harder, but it's worth it in the long run, no?

Then the higher rates kick in....

I just hope that the axe falls as heavily on the top cats as it does on the lowly broker/agent.

[edit on 19-6-2008 by jsobecky]

reply to post by Illusionsaregrander

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Well considering in many states it is actually an attorney who does the closing (by law...look it up) legal advice is not that difficult to come by. Especially when it comes to making the largest purchase of your life time, spending a couple of hundred dollars to hire an attorney to help sort things out doesn't sound like such a bad idea. ESPECIALLY if you are having difficulty understanding what it is that you are signing.

As far as predatory lending goes, yes it does happen. But nowhere near as often as people may believe. Do you not see that the mortgage industry is one of the most regulated of any in the country. Full and complete disclosure of terms is required by law ad nauseum, a written Good Faith Estimate is required within three business days of application and pulling credit. There are compliance forms that must be signed by both the lender and the borrower prior to even beginning a loan application, fully advising your of your rights as a consumer.

What more can be done to inform a borrower? Times that by the fact that you have a minimum of three full business days to review your final paper work or have someone else review it for you. Three full days to decide wheather or not you made a clear decision, what other industry offers that type of fail safe? It is funny that people will dog out loan officers for making 1-3% on a loan transaction (we are limited by law to how much can be charged...look up Section 32 mortgage laws if you dont believe me)...yet they are more than willing to pay a realtor 6-8% of the loan amount for doing virtually nothing. And most times the realtors are the ones trying to land people on more house than they can afford, so that they can make more money.

Do you feel that it is a sale persons job to give you a product at cost? Do you not feel that a reasonable profit should be made in order to stay in business? Do me a favor, next time you buy a car, why don't you ask the car salesman to give you three days to decide if you were given a fair deal, see what he says. Or better yet, when you go to the mall to buy a new coat or go to Home Depot to buy a new washing machine, go ahead and ask them how much mark up is in that product. If you are fortunate enough that they actually tell you, I can assure you it will be a lot more than 1-3%.

Bottom line is this.....there are some people out there who are legitimately victims of predatory or unscrupulous lending practices. But the other 99.8% are people who bought more than they could reasonably afford, or bit off more than they could chew. I am not anti-consumer, in fact I counsel people who have had difficulties and a lot of people who are facing foreclosure. Not saying they are bad people, things happen like job loss, death or illness in the family etc, but to take away any blame from a borrower who did not look out for their own best interests, or knew they could not afford the house they were buying but did it anyway, that is irresponsible and unfair to mortgage professionals who actually do their job correctly.

I think it's great that corporate America is being held responsible for the near ruin of the economy. Borrowers in the sub prime market were probably dysfunctional people who were forced to take advantage of a certain product because of poor credit. Just like buying a car, anyone will give you a car loan if you are willing to pay an outrageous apr. The borrowers, therefor should bear a bit of responsibility, but those hedge fund managers manipulated the market enough so that they finally destroyed it. That's why government regulation of the economy is a good thing, to keep robber barons from destroying everything!

reply to post by jsobecky

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There are no higher rates to kick in if you do not sign an adjustable rate mortgage. Always take a fixed rate, even if it means a higher rate and payment. In the long run ARMs are a bad idea because you never know what the market will do.

Hence what we have now. And just so you know, most lenders do not even offer adjustable products any more, and the ones who do, the rates are higher for an ARM than they are on a traditional 30 year fixed.