Mortgage News: The Crime of the Century
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In New York two stock brokers have been found guilty of securities bait-and-switch.
The two men face decades of jail time for defrauding investors by selling securities which were described as being backed by federally-guaranteed student loans when in fact they were actually auction-rate securities, a more risky financial product.
So, let’s review. It’s illegal for stock brokers to engage in bait-and-switch tactics. Why then is such behavior entirely fine for loan officers and mortgage bankers selling loans from national lenders?
It’s a normal and routine thing to sell borrowers mortgages which are not right for them. Don’t believe it? According to the Wall Street Journal, its review of subprime loans showed that 61 percent had been sold to borrowers who qualified for better better financing with lower costs. (See: Subprime Debacle Traps Even Very Credit-Worthy, December 3, 2007)
How is it possible that borrowers consistently opted for loans with worse terms and higher costs during the past few years? Do you think when lenders promised to get those borrowers the best possible terms and instead sold them loans with high costs but higher lender profits that no bait-and-switch was involved?
There’s justice for rich investors, but when was the last time that a mortgage broker or a loan officer went to jail for screwing a borrower? As we have explained, predatory lending is not even a federal crime, it’s perfectly legal under federal rules to ruin mortgage borrowers with higher fees and costs then they should be paying.
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