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Thread: Mortgage Fraud

  1. #1
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    Mortgage Fraud

    Today, the FBI and mortgage industry professionals believe 10-15% of all loan applications contain material misrepresentations, i.e. fraud. Many times these fraudulent loans end up in foreclosure resulting in financial losses to mortgage lenders. Unfortunately, many lenders recoup these financial losses from the public by increasing the cost of loans. Fraud hurts everyone. Fraudulent loans only exacerbated the lenders problems. Many times fraudulent foreclosed loans resulted in substantial losses. An example could have been a loan officer who fabricated pay stubs to help a borrower qualify for the loan -- insuring the loan officer collected his commission. Another example could have involved a borrower who submitted falsified tax returns. GAPS investigators researched files for misrepresentation and provided lenders the evidence needed to proceed with civil and/or criminal filings against the perpetrators. So the next time you or a friend applies for a loan, be forewarned: misrepresenting information on a mortgage loan application is illegal. Your information may well be reviewed by AEGIS (TM). If a lender detects misrepresentation, federal law provides for those convicted of loan fraud to receive a possible 30-year sentence and up to $1 million in fines! SOURCE: Robert J. Sadler, GAPS/AEGIS (TM).

    Last time, I wrote about the false sexual harassment allegations made against my friend "John". Well, it turns out there is a lot more to the story. John works as an underwriter for a lender in the non-conforming loan business. This lender receives its loan applications (via company sales personnel) from licensed brokers across the country. His job is to review all credit, income and collateral documents that are used to qualify a borrower for a mortgage loan. In the first few months of his new job, John was given extensive training by his supervisor much like an apprentice gets feedback as he hones his knowledge, skills and abilities. Ocassionally, John would discover fraudulent income documents and immediately report this to his supervisor. Surprisingly, the supervisor would handle it in a somewhat cavalier manner. He would simply instruct John to hand the file back to the salesperson. John never saw the file again. At the time, this did not appear odd to John as he was new at the company and was not educated yet about the company culture. All that changed the day John received the sexual harassment email from his supervisor.

    After recovering from the sting of such a false allegation, John began to wonder why and who would make such a libelous and slanderous charge. What was their modus operandi? Well, it didn't take long for John to put "two and two together" or shall I say "one and one together". A few weeks after receiving the email, John was informed by a trusted contact that his accuser had accidently blabbed over drinks of what she had done. His accuser was not the woman his supervisor had hinted at but rather someone who had much to gain by seeing John removed. After all, it was mostly her loans that contained fraud. This woman contributes well over a quarter of the entire sales team's loans each month bringing her very large commissions The supervisor for her and John receives a very large commission each month as well. John earns a straight salary. Who has the competitive political advantage? Or better yet, who has the most to lose? What are John's options? Should he continue to work for this company? Should he report any further fraud from his accuser? Can John trust his supervisor? How far up the corporate ladder does the corruption go? Should John contact the Federal Bureau of Investigation and/or Homeland Security? If John does nothing, can he be considered an accessory after the fact? What should John do?

  2. #2
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    Re: Mortgage Fraud

    Can he trust his supervisor? Seems there's already evidence that he cannot.

    If I understand the situation, and this job description:

    His job is to review all credit, income and collateral documents that are used to qualify a borrower for a mortgage loan.
    Then I'd say John is in a position of being the expendable scapegoat when the fraud becomes an issue.

    I'd say John should leave the company.
    Its turtles, all the way down.

  3. #3
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    Re: Mortgage Fraud

    As someone who works in the foreclosure department of the 4th largest mortgage corporation in the world supporting the legal department over litigations stemming from home mortgages...

    ... the first part of what you've stated is exactly right. Namely. fraud hurts everyone. It ups the cost of servicing which, in turn, ups interest rates. Fraudulent mortgages are a huge problem as well as realtors hungry for a comission and eager to get new home-owners into a house they may not be able to afford.

    As for the sexual harassment part of your post, it's sad that your friend John may have to leave his company because of fabricated allegation. I recommend he seek legal council immediately if he has not done so already.

  4. #4
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    Re: Mortgage Fraud

    He should start keeping log of all of his daily activities. He should contact a legal advisor immediately, and use the terms, "hostile work environment" as a precursor. He should speak with his legal rep about being a "whistle blower" and who to contact regarding the charges of fraud.

    He should do all of these things ASAP! Now, if he doesn't want the hassle, he should find other employment, but only AFTER the allegations of harrassment are cleared. That stuff can haunt you forever in the job market.
    But if you do not find an intelligent companion, a wise and well-behaved person going the same way as yourself, then go on your way alone, like a king abandoning a conquered kingdom, or like a great elephant in the deep forest. - Buddha

  5. #5
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    Re: Mortgage Fraud

    Keeping a log is a good idea. He should share the log with his attorney.

    Also, consult your legal councel first, but your friend should discuss the situation with his human resources director. He should also minimize contact with the individiul in question.

    What is the nature of the harassment allegation? Are we talking about something as harmless as an occasional innapropriate glance or has she fabricated an entire scenario? There's a big difference between, "John keeps staring at me" and "John cornered me in the break room while no one was around and asked me to take my clothes off right then and there!"

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    Re: Mortgage Fraud

    Boy howdy. I don't have an extremely high income, but I have a very high credit rating, (no credit card debt, no late payments,etc since I do there are plenty of mortgage companies who have already approve me for up to $250,000! There is no way in the world I could make the payments such a high amount would incur. (If I recall it was somewhere around $2000 a month. Fortuneatly my wife and I know better and will stick to our ceiling ammount of $125,000, half of what they say I can afford................If all my properties were paid off I would be worth about $250,000. But as it is, the bank still holds the notes on my stuff and the reality is I am worth as much as I can get out there and earn, not the $250,000 they say I can borrow.........................:O)
    When the power of love becomes stronger than the love of power, there will be peace..........jimi hendrix.

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    Re: Mortgage Fraud

    The lender is licensed by either the State Department of Corporations or the State Department of Real Estate. Different states have different names for these organs, but their oversight responsibilities are all very similar. A complaint lodged with either of those institutions can get the lending license investigated.

    The Department of Housng and Urban Development oversees enforcement of RESPA and Reg. Z, which relate more to how a borrower is treated nd what disclosures he must receive, but they may have some clout here.

    The real loser here is the lender, whose underwriting criteria are being corrupted. The cost of foreclosing is too high to permit this fraud to continue to be perpetrated, and the lender who is portfolioing or securitizing the loans faces dire financial and market risk. This issue should be brought up to whoever is in charge of lending policy at the lender's head office.
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    Re: Mortgage Fraud

    Joe, I should point out that I have an interest in a mortgage company so I may be able to point you in the right direction. PM or e-mail me if you care to.
    To begin to think is to begin to be undermined.
    Albert Camus, An Absurd Reasoning

    Who knows most, doubts most.
    Robert Browning

  9. #9
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    Re: Mortgage Fraud

    Ah, my old friends... RESPA, TILA (Truth in Lending Act)...

    Oh, the stories I could tell having worked in the trenches... a bit of quick Zhavric employment history:

    August 2001 to January 2002 - Worked as a temp taking incoming calls for the foreclosure department of a major mortgage corporation. Do I really need to say anymore on this?

    January 2002 to November 2003 - Worked as a foreclosure analyst overseeing attroney firms in the states of Georgia, Maryland, the Carolinas, Florida, Deleware, Maine, and the District of Columbia who are performing foreclosures on our behalf. During this time, I get a "crash course" in loan servicing as folks who work foreclosure get to figure out what went wrong.

    November 2003 to Febuary 2004 - Work in the foreclosure department, but promoted to "default resolution" which is the team that supports the legal department where lawsuits / contested issues / other litigations occur on home loans. Get another crash course in coroprate and mortgage law. Everything from lowly eminent domains to class action lawsuits for millions of dollars comes across my desk in one form or another.

    Febuary 2004 to present - Still in default resolution, but now working the "sub-prime" portfolio aka mortgages for individuals with less than perfect credit.

    So... yeah... Sorry if that was kinda off topic or TMI, but I just wanted you guys to know that I'm in the "trenches" on the issue of home mortgages gone wrong. Mortgage fraud is a huge issue that affects the entire country because of its' impact on interest rates.

    Yes, the lender loses out in this situation, but if the lender loses out, then everyone starts to lose out as interest rates slowly climb.

  10. #10
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    Re: Mortgage Fraud

    Okay, Zhavric, you're hired. What would you do in this guy's situation? Not stop at "keeping a log," I suppose?
    Its turtles, all the way down.

  11. #11
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    Re: Mortgage Fraud

    Quote Originally Posted by Zenstone
    Okay, Zhavric, you're hired. What would you do in this guy's situation? Not stop at "keeping a log," I suppose?
    Unfortuneatly, this thread is hitting very close to home.

    A couple of weeks ago, I was called into my boss' boss office and informed that a certain female member of my team (we will call her Jane, though that's not her real name) felt that I was "Checking her out". I replied that I took the situation very seriously and stated that I did not feel I had been in the wrong, but at the same time I acknowledged that if she feels uncomfortable then that is a problem. Fortuneatly, my father is an attorney and I have consulted with him. The best thing he told me to do (aside from the obvious which is to completely ignore Jane) is to create a log and be pro-active. By pro-active I mean that I will, in a week or two, go to my boss's boss and say, "Have there been any more complaints? (assuming the answer will be no). If so, then what do you recommend I do?"

    This is not quite on the scale of what you detailed above, but it's in the ballpark.

    The problem is that it turns into a witch hunt very quickly. What state is your friend employed in? Is it a right to work state? In Ohio, an employee can be terminated at any time for any reason. Many employers have clauses in their paperwork that state by employing you, you acknowledge that you can be let go at any time WITHOUT being given a reason.

    On the other side, we live in America where anyone can sue anyone or any company at any time for any reason.

    Bearing all that in mind, if your friend values his job, he needs to consult an attorney who specializes in this sort of case. I cannot stress this enough. The sooner he does so, the better. Jane and I are on the same team at work and our jobs do not involve any sort of fraud... that is to say, Jane has nothing to gain by bringing up accusations against me where your friend seems to be facing some sort of cover-up.

    An attorney will be able to guide him better. Good luck to him.

    P.S. Even if your friend leaves his job tomorrow, have him consult with an attorney. If he leaves, it could be seen as an admission of "guilt". Just because he doesn't work there anymore doesn't mean they can't pin criminal wrongdoing on him. Consult an attorney.

  12. #12
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    Exclamation Re: Mortgage Fraud

    Quote Originally Posted by JOEBIALEK
    Today, the FBI and mortgage industry professionals believe 10-15% of all loan applications contain material misrepresentations, i.e. fraud. . . .
    be forewarned: misrepresenting information on a mortgage loan application is illegal.
    Your information may well be reviewed by AEGIS (TM). If a lender detects misrepresentation, federal law provides for those convicted of loan fraud to receive
    a possible 30-year sentence and up to $1 million in fines! SOURCE: Robert J. Sadler, GAPS/AEGIS (TM).
    Hello Joe & the others.
    Joe it's tough that your friend is in this pickle.
    This is Real Estate Preditory Practices. This is a huge problem for my area. There was the first initial criminal probe
    in the Spring of 2001, and finally, some are being prosecuted.
    But here are some links to a few recent articles to direct you to some reference
    of who and what the players do, and how prosection came to be.


    Quote Originally Posted by Monroe's first real estate fraud sentence issued
    "STROUDSBURG —— A Martinsville, N.J., man this week became the first person to be
    sentenced in Monroe County court as a result of the Poconos real estate fraud probe, which began in 2001.
    Monroe County President Judge Ronald E. Vican sentenced Keith Doug Buchanan, 36,
    to three years probation and ordered him to pay a $5,000 fine to Monroe County.
    One of Buchanan's victims said she was "extremely disappointed" with the sentence,
    which she said won't discourage real estate fraud in the county.

    Buchanan pleaded guilty to forgery, a felony, in April. In exchange for the guilty plea,
    five counts of forgery were dropped. Buchanan, a mortgage broker with Northstar Mortgage
    in Allentown, was charged with forging a home mortgage he arranged for
    Kellie and Larry Nau so that the couple could buy a Tunkhannock Township home. ..."
    http://www.poconorecord.com/2004/local/lc071504.htm
    Quote Originally Posted by New state AG promises to pursue real estate case
    "HARRISBURG —— Remaining major decisions regarding the possible filing of state civil suits and criminal
    indictments in the Poconos real estate fraud investigation will probably be made during
    the next 12 months, says Pennsylvania's new attorney general.

    "I would expect future suits will be filed and they will certainly be filed during my tenure
    as attorney general," said Gerald Pappert, Gov. Ed Rendell's nominee to succeed Mike Fisher.
    "It has been a big and important issue to this office for some years now.
    It will remain a priority while I'm attorney general." . . ."
    http://www.poconorecord.com/2004/topstory/tp012004.htm
    Quote Originally Posted by Foreclosure rate is outpacing building
    ". . . Goldstein's comments Monday
    at a Congressional hearing on Poconos real estate fraud accusations sparked cheers
    from an audience which included scores of people who contend they were defrauded
    in the purchases of their homes.

    The findings contradict assertions by some building industry representatives and
    public officials who say county foreclosures —— more than 6,100 since 1995 and more than 2,700 between 2000 and 2003 ——
    are rising only because the county's population and housing stock have grown,
    and don't represent any real increase in foreclosure rates.

    The Banking Department study is aimed at determining the degree to which those foreclosure filings are the result of home-sale
    fraud that puts buyers into a financial hole from which they can't escape.
    Allegations include use of inflated appraisals to sell homes at thousands more than
    they are actually worth on the open market, phantom financing, deceptive advertising, obligating buyers to
    excessive interest rates and/or undisclosed second mortgages, and coercion
    to prevent buyers from backing out of deals.

    Preliminary study results released Monday to the U.S. House Capital Markets Subcommittee show foreclosure rates
    have gone from about 1.8 per every hundred housing units in 2000, to about
    2.3 per hundred in 2002. Those rates exceed those for seven other
    Pennsylvania counties that were compared, including the state's
    two most urban areas. . . . "
    http://www.poconorecord.com/2004/topstory/tp061504.htm

    Quote Originally Posted by Joe
    "Last time, I wrote about the false sexual harassment allegations made against my friend "John". . . .
    Quote Originally Posted by Joe
    What are John's options? Should he continue to work for this company? Should he
    report any further fraud from his accuser? Can John trust his supervisor? How far
    up the corporate ladder does the corruption go? Should John contact the Federal
    Bureau of Investigation and/or Homeland Security? If John does nothing, can he be considered an accessory after the fact? What should John do?"

    Sorry Joe that your friend is in that situation, but the others are right. See an attorney.
    How the above artilces on this real estate probe around my area helps somewhat, somehow
    at least to see how this dirty little deals go down.

    :(
    JG-Sarah
    ~~~~~~~

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  13. #13
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    Re: Mortgage Fraud

    I am surprised that mortgage fraud has only just come to light in the States, you do after all have the Washington Post and Robert Redford!

    Misrepresentation is something that was stamped on and largely dealt with over here in the 1980s.

    There will always be scams and lies when a fast buck is there to be made. There are always people queing up to cut corners and sail close to the wind. It is for the more honest citizenry to blow the whistle on them and for the regulators to stomp but good on them.

    The less moral among us human beans do a simple calculation before acting illegally. What is the gain against the odds of getting caught and its consequences.
    "We don't see things as they are, we see them as we are." - Anais Nin.
    Emitte lucem et veritatem - Send out light and truth.
    'Fere libenter homines id quod volunt credunt' - Julius Caesar (rough translation, 'Men will think what they want to think')
    Kill my boss? Do I dare live out the American dream? - Homer Simpson.

  14. #14
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    Re: Mortgage Fraud

    Quote Originally Posted by FruitandNut
    I am surprised that mortgage fraud has only just come to light in the States, you do after all have the Washington Post and Robert Redford!
    Crusading actors and whistle-blowing newspapers aside, the reason that mortgage fraud is getting so much ink these days is because everyone just refinanced their house. Interest rates only recently started to climb after spending about two years at an all time 30 year low. I've seen FIXED rates as low as 3.5%!!!!

    Point being, that if you're in the mortgage fraud business, there was never a better time to scam people than the last few years. It was really uncanny: every financial analyst spent about two years saying, "Interest rates will go back up any day now..." and they didn't. That created the perfect atmosphere for con-men looking to sleaze some poor would-be homeowner into purchasing a home without having all the facts. "Buy now because you won't have such a good interest rate later..."

    So, the answer to your observation is that there's been a lot more fraud of late.

  15. #15
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    Re: Mortgage Fraud

    Quote Originally Posted by FruitandNut
    I am surprised that mortgage fraud has only just come to light in the States
    Well if truth be told, we've been a tad bit pre-occupied with other things of late this past decade.

    Quote Originally Posted by Zhavric
    Crusading actors and whistle-blowing newspapers aside, the reason that mortgage fraud is getting so much ink these days is because everyone just refinanced their house. Interest rates only recently started to climb after spending about two years at an all time 30 year low. I've seen FIXED rates as low as 3.5%!!!!

    . . . there was never a better time to scam people than the last few years. It was really uncanny: every financial analyst spent about two years saying, "Interest rates will go back up any day now..." and they didn't. That created the perfect atmosphere for con-men looking to sleaze some poor would-be homeowner into purchasing a home without having all the facts. "Buy now because you won't have such a good interest rate later..."
    So, the answer to your observation is that there's been a lot more fraud of late.
    Those "Crusading actors" I believe are played by the politians who look to grab the spot-light to a good re-election crusade blitz. As for the "whistle-blowing" newspapers/reporters, that comes with the scene as the people effected in a given local area will naturally want their plight of fraud plastered on the front pages. From the first phone call, the probes begin on various fronts. The reporters, the local District Attorney's investigators, and on to the states Att. General's office, and in the cases here in my area, the FBI as well. Of course, there are a handful of local/township reps, at the county levels, the state, and the good old ones from D.C. that are on the bandwagon too.

    In the whole mess here by me, the fraud involved land/house deals, false appraisals, falsified gross incomes, real estate "Transfer Fees" taxes not being paid [thus the other taxpayers lose in the process], random other falsified documents to talk about the "Truth-In-Lending Laws" ... yeah right. And a whole host of other deceptions you can shake a finger at.
    Nothing has come out to the attention of any re-financing fraud.
    So far that is, time will only tell.

    But the important thing here is that the buyers themselves are un-educated to the home buying process, and thus are opening themselves up to be taken for a ride. The promise of being part of the landscape in the great American dream of home ownership is too enticing, and so they’re too dazzled to see the "red flags" as they’re just listening to all the ohh’s and ahh’s the selling agent is handing them on a silver platter. They don’t stop to see and consider all the other aspects of home ownership (taxes, maintenance, upkeep, etc.), the re-location, the re-adjustments, the new commute (and the price of the new commuting change. i.e. car upkeep or mass transit, etc.) When the real figures finally hit home that they’re not matching-up, and things aren’t what they assumed it would. Then wham, they realize they were taken for a ride. A little self-education to the home buying process would behoove the potential buyer-to-be that’s for sure.

    And a lawyer! Regardless of whether ones states does not have a mandatory law that an attorney must be used in all closings ... get one anyway. Never go to a closing without a lawyer, and preferably one that the selling is not recommending.
    After all, it’s only ones own personal "assets" that one must protect, and nobody else is going to do it for anyone but their own selves.
    Pleasant day all!
    JG-Sarah
    ~~~~~~~

    October is "Breast Cancer Awareness" month. "Help Save The Life Of A Woman YOU LOVE!"©
    ~ Please consider a donation to Breast Cancer Research.
    Remember to remind the women in your life to GET their annual mammograms!
    Thanks from one woman for ALL women.

    October is also "National Domestic Violence Awareness" month for support
    not only with domestic violence, but abused children, and "Missing & Exploited Children"

    "When the rich wage war it is the poor who die." ~ Sartre

  16. #16
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    Re: Mortgage Fraud

    The problem is really underwriting fraud. The reps aren't falsifying VOE's and VOI's to get a borrower DECLINED, but to get them their loan! The underwriting department is there to protect the lender and ensure that their approval guidelines are respected and applied.

    If the UW manager is abetting this fraud, the corporate office of the lender needs to be informed. If corporate doesn't care, then I would determine who regulates the lender's securitizations and let them know that the paper the lender is selling is backed by fraudulent loans.

    This will pinch off the spigot of money, and the lender will fold faster than if a school of lawyers started investigating HOEPA violations. The institutions who buy the lender's securitized loans only need a whif of fraud to blacklist the lender and their lawyers are mighty frisky, too.
    To begin to think is to begin to be undermined.
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    Re: Mortgage Fraud

    Hi. I'm a housing lender. I'll let you pay me 500,000.00 for a 150,000.00 house over the course of 30 years. Your payment will go up and down regardless of wether or not your rate is fixed on account of taxes & insurance. If you decide to not make payments, I will sick my collections department on you and charge you lots of late fees. If you decide not to pay your mortgage for more than three months, we will "hire" a bunch of attorneys to foreclose on you and make you responsible for whatever fees they charge.

    In return, you get to own your own home...

    ... the moral of the story is to always pay for your house.

    As far as lenders getting blacklisted? I don't see a lot of that as I deal primarily with the big lenders: FannieMae, FreddieMac, GNMA... for me, the "small" investors are institutions such as Wachovia, Chase/BankOne, Washington Mutual and the like.

  18. #18
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    Re: Mortgage Fraud

    Fannie and Freddie are A and A- lenders. You gotta have good credit and good ratios (or good equity) to get a loan on their terms.

    The lender in question is a subprime lender, catering to borrowers with damaged credit and iffy circumstances. With A paper, a lender just sells the loan off to fannie or freddie and then relends the proceeds. Subprime lenders have to securitize their own paper and sell the resulting mortgage backed security to institutional investors. The investors do not have the unwritten government guarantee on these MBS's that Fannie and Freddie provide, so they have to trust that the underwriting guidelines declared by the lender are indeed adhered to and judge their risk/ reward matrix accordingly.

    If the lender is passing paper that is more risky than declared because the UW guidelines are being dodged, this is securities fraud. If it can also be determined that borrowers are taking on mortgage obligations that they cannot service because of lender fraud, HUD has recourse through HOEPA.
    To begin to think is to begin to be undermined.
    Albert Camus, An Absurd Reasoning

    Who knows most, doubts most.
    Robert Browning

 

 

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