The Massachusetts official is turning over nearly 32,000 documents to state prosecutors on the grounds that they may be improper. As a result O’Brien says criminal investigations should be started.

If 32,000 documents are questionable in just one recorder’s office, then what is the total nationwide?

In considering this matter, let’s recognize that a sworn foreclosure affidavit is used by judges and courts to throw people out of their homes for not paying FHA, VA or conventional mortgages.

If the affidavit is wrong — or fraudulent — it means an innocent family can unfairly be made homeless by order of the court. This is a big deal, certainly as big as shoplifting or stealing a cow, crimes we seem to prosecute with great zeal.

The O’Brien release is below:

Saying that the time has come for a full scale criminal investigation, Southern Essex District Register of Deeds John O’Brien, today has sent some 31,897 of what he says are fraudulent documents that have been recorded in the Salem Registry to Massachusetts Attorney General Martha Coakley, U.S. Attorney General Eric Holder and U.S. Attorney Carmen Ortiz.

O’Brien said that he is asking these officials to impanel a Grand Jury to look into the evidence that he has presented.

“I am confident that these documents will show a pattern of fraud, uttering and forgery. These documents are signed by known robo or surrogate signers, whose signatures were supposedly witnessed by notary publics. In addition, these documents may contain fraudulent information in the body of the documents. I believe that a criminal investigation is the next step to hold the perpetrators responsible.”

O’Brien praised Attorney General Coakley for her aggressive pursuit of wrongdoing in her civil action but noted that other states such as California, Nevada, Illinois and Michigan have launched criminal investigations, and O’Brien is hopeful that Massachusetts will do the same.

O’Brien strongly suggests that the Grand Jury should subpoena both the past and present Chief Executive Officers (CEOs) of the Mortgage Electronic Recording Systems, Inc. (“MERS”), Bank of America, JP Morgan Chase, Citibank, Wells Fargo, Countrywide, Washington Mutual among others. In addition, he is asking that the top officials of DOCX, Nationwide Title Clearing, Inc. and LPS also be subpoenaed.

“These companies have been retained by MERS and its member-banks to produce the documents that I am alleging contain fraudulent information. It is one thing to go after these institutions with a civil action, but the only way to let them know that you are serious is to call them before a Grand Jury.” O’Brien said,

“There is no question in my mind that the officers of these banks and loan processing servicers made a conscious decision to commit fraud and participate in a scheme to deprive the public from knowing the true holder of their mortgage while at the same time avoiding paying billions of dollars in recording fees. It is my opinion that they acted as a criminal enterprise, crossing state lines to commit their crimes and in most cases using the U.S. Postal Service to send these documents to registries of deeds, thereby committing mail fraud. We need to know what they knew and when they knew it. Until the CEOs who allowed these fraudulent activities to happen under their watch are sent to jail for what they did, these types of illegal behaviors will continue.”

Just last week, O’Brien’s Registry received 3 documents from Bank of America, all signed by a known robosigner, Linda Burton.

O’Brien said, “If they are sending them to me, of all people, it is safe to assume that they are sending them to registries across the country.”

O’Brien refuses to record any documents signed by a robo-signer on his list unless those documents are accompanied by an affidavit attesting to the signature. So far, he has not received one affidavit.

“That clearly shows me that those documents were in fact fraudulent.” O’Brien said that if he or anyone else went into one of these major banks and forged a signature on a loan document they would be arrested and sent into jail.

So it begs the question, why haven’t these CEO’S been held accountable? O’Brien cited the case of the individual who walked into a Walmart and tried to make a purchase using a fraudulent One Million Dollar bill. He was arrested and charged with attempting to obtain property by false pretence and uttering a forged instrument.

O’Brien said, “As far as I am concerned, this is what these banks have been doing for years. Make no mistake, MERS and its member-banks are taking people’s homes using fraudulent documents and that is something we do not do in America.” In addition, O’Brien is zeroing in on the major foreclosure law firms that he believes have acted as a co-conspirator in flooding the registries of deeds with these fraudulent instruments.

“These attorneys should know better. They have acted as co-conspirators in perpetrating this fraud. I am sending a letter to the Massachusetts Board of Bar Overseers asking that they conduct an independent investigation into the activities of these firms. Unlike our Massachusetts Attorney General Martha Coakley, I understand that there are other Attorneys General and other public officials across the country who would like nothing better than to sweep this matter under the rug and grant these lenders, loan servicing companies and their foreclosure-mill attorneys immunity for the damage that they have caused, not only to our
economy but to people’s property rights. They would be willing to accept pennies on the dollar, a slap on the wrist, and a promise to never do it again.

“If that should happen, it would be the biggest sellout of the American People that I have ever seen. It would send the wrong message that the big boys can get away with anything. As I have been saying all along, they may think they are too big to fail, but as far as I am concerned, they are not to big to go to jail. The top officials at MERS, its member-banks, servicers and foreclosure-mill attorneys must be prosecuted and held accountable for their fraudulent schemes that brought profits to their institutions by cutting corners, circumventing land recordation systems through fraud, uttering and forgery.”

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Until recently the daily mail would often include one or more “checks” to buy or refinance real estate. Such checks looked real with lots of “official” numbers and “genuine” markings. Most importantly, they included your name and a very big number, say $189,000.

But before you ever got to the check, the good part was the envelope. It sure looked authentic, somewhat like those brownish envelopes the IRS uses to send tax refunds, with a little window showing your name on something that clearly seemed check-like.

The checks with the big numbers were designed so that you would act now. Why not get a real check? Just call today….

Real Costs

Of course, the letter did not seem to say too much about such matters as mortgage rates, points, closing costs, prepayment penalties or a host of other issues. And despite claims in very big letters, there was always the requirement in micro-type that all offers were subject to approval.

The letters were nothing but ads and the end-result of the fine print was that recipients were assured nothing. If you qualified you could get a loan, whether the cost reflected current mortgage rates was unknown and perhaps unlikely.

But we no longer get such checks in the mail and here’s why:

First, the government ruled earlier this year that lenders could no longer use official logos, names or acronyms to create the sense that their products were government endorsed or approved. Among other things, this meant that ads with the FHA logo were out.

Second, the Federal Trade Commission came out with its Mortgage Acts and Practices rule in late summer. Under MAP an act or practice is deceptive if:

1. There’s a representation, omission of information, or practice that’s likely to mislead consumers acting reasonably under the circumstances; and
2. That the representation, omission, or practice is material to consumers.

One of the important points about the MAP rule is that it applies to “the source of an advertisement or other commercial communication.” This is significant because borrowers used to receive mail which looked like it was from their current lender but was actually from a competitor.

In fact, when our current lender contacted us about a year ago to refinance our existing loan to a lower rate and to pay all closing costs we were so dubious we called the lender, a major bank, and spoke with the head of the lending department to confirm the offer.

Why would a lender make such an offer? With good credit and a solid payment history we could refinance elsewhere and the lender would lose a good borrower. By making an attractive offer to refinance the lender created a new mortgage which could be re-sold — at a profit — on the secondary market. Everyone won, which is how it should be.

The big question raised by the HUD and FTC rules is very simple: What took so long? The practices prohibited under their new rules have been going on for years and devalued legitimate ads by legitimate lenders. And those borrowers who fell for gimmicky promotions and bogus “checks” likely paid far more than they should had they looked at the sensible options available in the marketplace.

Why Mortgage “Checks” Are Not In The Mail is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: check, Federal Trade Commission, fraud, HUD, loan, mail, mortgage

Did you ever wonder why you get so many letters and emails from lenders who offer low mortgage quotes and seem to be affiliated with the FHA or HUD? The answer, very simply, is that you ought to wonder. Why? Lenders are not supposed to imply or infer any endorsement from the federal government.

Those strange communications which seem so “official” are simply tricks to gain attention from prospective borrowers, not much better than claims you’ve won a lottery or that a seductive encounter awaits your attention.

In the world of HUD-speak a “device” can be a letter, email, ad, or channel “soliciting, promoting or advertising FHA products or programs.”

Now, says HUD, FHA-approved lenders “are strictly prohibited from displaying the official FHA Approved Lending Institution logo(s) in a location or manner within a Device that creates the false impression that the Device is an official government form, notice or document or that otherwise conveys the false impression that the Device is authored, approved, or endorsed by the Department or FHA. Furthermore, alteration or modification of the FHA Approved Lending Institution logo(s) is strictly prohibited. Non-approved mortgagees, including Third Party Originators, are prohibited from using the official FHA Approved Lending Institution logo(s) on any Device. Moreover, use of the FHA logo is strictly prohibited. No person, party, company, or firm, including FHA-approved mortgagees, may use the FHA logo.”

Because of the new rule, starting in May you’re likely to see a whole new class of messages from lenders, messages which plainly state that the missive is not authored, approved, or endorsed by HUD or the FHA.

When looking at lender letters which hint or suggest some sort of government affiliation there are some question to be asked:

1. Is the sender an approved FHA lender?
2. Is the sender affiliated with your current lender? This is important because letters often contain the name of your current lender in big and bold type — but the senders actually have nothing to do with your lender.
3. No matter how seemingly “official” are you looking at a government form or some concoction churned out by a lender’s art department?
4. Is some sort of official sounding program mentioned? Is there actually any such program? Look up the program by name on the Internet and see if you find any government sites which explain the program in detail.
5. How can you get those low, low rates featured in the letter? That is, how do you qualify? (Beware, in some cases you can only get the lender’s touted rate by completing your loan application on the skin of a unicorn….)
6. Is there a minimum loan amount? How about a maximum?
7. Are the rate mentioned in the “device” subject to change?
8. Does the letter tout monthly payment savings? Does it also say that if you refinance with the lender it’s possible that your interest rate or overall loan costs could actually rise over the life of the loan?
9. Does the letter include some legal-sounding jargon about interfering or obstructing the mail? Does it make the letter seem more important? Is it anything but nonsense?
10. Does the letter make any reference to borrowers with bad credit? If you have damaged credit do you really think the lender has some magical way to offer a discounted interest rate?

Of course, when looking for a mortgage always protect your interests — shop around, speak with several lenders and get written Good Faith Estimates (GFEs).

New HUD Rule Goes After Fake Mortgage Loan Letters is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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It’s also nothing new. We’ve been reporting about problems with the foreclosure system for years. We gave a 2006 speech before the nation’s real estate regulators at the height of the real estate boom explaining why huge numbers of foreclosures were inevitable. (See: Toxic Loans: The Storm To Come)

On September 20th Bloomberg News reported that “Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York.” (See: Ally’s GMAC Mortgage Halts Home Evictions in 23 States)

In turn, Ally denied the story, saying that “recent reports have stated that GMAC Mortgage instituted a moratorium on all residential foreclosures in 23 states. This is not true. In fact, all new residential foreclosures are continuing in the ordinary course of business with no interruption in our usual practice.

“The speculation likely emanates,” said Ally, “from a direction previously given by GMAC Mortgage to certain of its outsource vendors to allow time to address a potential issue that was raised in a number of existing foreclosures challenging the internal procedure we used for executing one or more judicially required forms. This direction was to suspend evictions and REO closings where the related foreclosure could have been impacted by the same internal procedure. We are also reviewing certain previously completed foreclosures where the same procedure may have been used.”

The Washington Post then chimed in with two important stories:

First, on September 22nd, the Post reported that “some of the nation’s largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork — an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.”

The problem is that lenders are supposed to have an official review all paperwork to assure it’s correct and accurate before seeking a foreclosure. In the case of Ally, reported the Post, the “head of Ally’s foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

“In a sworn deposition, he testified that he did neither.”

“The reason,” says the Post, “may be the sheer volume of the documents he had to hand-sign: 10,000 a month. (See: Ally Financial legal issue with foreclosures may affect other mortgage companies)

The next day, the 23rd, the Post gets to the heart of a central foreclosure issue:

“The nation’s overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower’s files, according to court documents and interviews with attorneys, housing advocates and company officials.”

The Post then explains that “during the housing boom, millions of homeowners got easy access to mortgages while providing virtually no proof of their income or background. Now, as millions of Americans are being pushed out of the homes they can no longer afford, the foreclosure process is producing far more paperwork than anyone can read and making it vulnerable to fraud.” (See: Amid mountain of paperwork, shortcuts and forgeries mar foreclosure process)

The Post headline is simply wrong. Shortcuts and forgeries don’t just “mar” the foreclosure process, they damage the legal system, cripple the courts and undermine public trust. Everyone deserves not only their day in court but also the expectation of fairness when they arrive, and that includes families facing foreclosure.

Not “Just” A Paperwork Problem

The fact that borrowers obtained financing with no doc or low doc loan applications has nothing to do with a foreclosure proceeding. Lenders created the mortgage programs which allowed such applications and literally wrote the loan documents — they’re composed by lots of lawyers “in the lender’s usual form,” an expression which means the lender writes the loan rules and requirements.

When lenders foreclose they have an obligation to meet all requirements. If lenders do not correctly process their own claims that’s not the fault of the borrower.

A foreclosure is not a minor matter. Courts have an obligation to assure that the loss of a home — literally tossing someone on the street with everything they own — is justified. If that means a slow process, so be it. If that means all requirements to foreclose must be met, then that’s what should happen.

Money

The looming problem for lenders — and for courts — has been the wholesale denial of borrower rights. This is not merely a problem with “paperwork” or a “technicality.” The court system has been unjustly used to throw people out of their homes. How much of a bigger issue could there be?

One inevitable by-product of the mortgage lawsuits which are sure to come will be instances where foreclosures are determined to have been unjustified. One has to ask: How do we compensate borrowers who have lost their homes and been humiliated? How much money represents “just” compensation? Is there enough lender money to pay such claims?

Can We Undo Botched Mortgage Foreclosures? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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If you want a mortgage, Esteemed has one for you. Recent bankruptcy? No problem? A foreclosure last month? So what. Less income? They can work with you.

And help with short sales? Who could possibly do a better job than Esteemed?

“We guarantee a loan to fit every situation,” says Esteemed. “Our qualified loan specialists have been helping people just like you find the best interest rates and loan terms possible for your unique situation. We will guide you every step of the way to get you the loan you need. You can lower your current payments on your mortgage, refinance existing debt, and even get extra cash to pay for unexpected expenses.”

And getting a loan is hardly more difficult than going through a car wash.

“Even if you’ve been turned down by other lenders because of a less than perfect credit history, we can help. It’s time to act and start saving money today. Apply now and let us help you start on your way towards a debt-free future!

“it’s easy to qualify and 100% FREE to apply.”

There are two things about this lender which stand out. First, its “line” sounds a lot like some other lenders we’ve heard. Second, the company is a fraud.

“These scammers may create professional-looking websites, use trustworthy-sounding names and promise you loans to help meet your needs or live your dreams, even if you’ve had credit problems,” says the FTC.

“The catch comes when you apply for a loan or credit card and find out there’s a fee you have to pay first. If you pay, it’s unlikely you’ll see the promised loan, and you run the risk of someone using your personal or financial information to steal your identity.”

Six Warnings

The FTC says borrowers should be aware of six rad flags when looking at online mortgage sites:

• A lender who isn’t interested
  in your credit history. Ads that make claims like Bad credit? No problem, We don’t care about your past. You deserve a loan, Get money fast, or even No hassle — guaranteed often indicate a scam.
• Fees that are not disclosed clearly or prominently. Legitimate lenders disclose their fees clearly and prominently; they take their fees from the amount you borrow; and the fees usually are paid to the lender or broker after the loan is approved.
• A loan that is offered by phone. It is illegal for companies doing business in the U.S. by phone to promise you a loan and ask you to pay for it before the loan comes through.
• A lender who uses a copy-cat or ‘wanna-be name.’ Crooks give their companies names that sound like well-known or respected organizations and create websites that look slick to try to convince you they’re legitimate.
• A lender who is not registered in your state. Lenders and loan brokers are required to register in the states where they do business. Checking registration does not guarantee that you will be happy with a lender, but it helps weed out the crooks.
• A lender who asks you to wire money or pay a particular person. Legitimate lenders don’t ask anyone to do that.

More Bogus Sites

The FTC has created a number of fake sites in addition to Esteemed Lending Services. For instance, there’s FatFoe which will help you lose weight without diet or exercise and, of course, there’s also Glucobate???????, the all-natural diabetes breakthrough. Glucobate uses “Cucumis melo — or Elixir of Muskmelon — an all-natural sugar regulator with none of the side effects of the medications that break your budget without curing your condition.”

The FTC is using bogus sites to make a point: The fact that something is on the Internet and has a really nice web page does not mean a product or service is anything but an outright fraud. Use common sense, check around, speak with licensed professionals and hold on to both your wallet and your wonder when you see claims which seem to good to be true.

This Mortgage Lender Is A Fake (Don’t Just Take Our Word For It) is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: bankruptcy, Esteemed Lending Services, fake, Federal Trade Commission, foreclosure, fraud, FTC, loan, mortgage, short sale

But nowhere in the news do we hear of any effort to help the mortgage borrowers whose screwing made the financial meltdown possible. While the SEC is concerned about helping securities investors who lost $1 billion, no one gives a damn about the people who lost their homes.

Let’s look at what really happened:

*We have millions of foreclosed homes, a downsized economy and massive job losses as a result of the financial meltdown.

*The federal government had to bail out Wall Street because big banks and brokerages were stuck with mortgage-backed securities (MBS) they were unable to unload on pension funds and various investors.

*The MBS were insured in case their value eroded, but the insurance was no good because there were few if any reserves set aside for claims.

*To create mortgage-backed securities, Wall Street needed an ongoing supply of mortgages. Since lenders could sell virtually all the loans they originated it made sense to lower application standards and introduce non-traditional mortgage financing and popularize option-ARMs, interest-only loans, financing with little or nothing down, piggy-back financing and “stated income” loan applications which allowed borrowers to essentially guess their income.

Bottom line: There would not have been a financial melt-down if the mortgage origination process was effectively regulated at the point of sale, the moment when loans are sold to borrowers. With good loans the mortgage-backed securities would have been fine, the ratings would have been justified, few insurance claims would have arisen and a Wall Street bailout would have been unnecessary.

Best Rates And Terms

Anyone who has ever looked for a mortgage naturally wants the best possible rate and terms for their financial situation. And lenders are happy to offer such rates and terms, at least that’s what they say. After all, no one would use a mortgage lender who advertised the second best rates in town.

In other words, virtually all borrowers rely on mortgage lenders for product options, rate information and counseling. And lenders, for their part, have no obligation under federal rules except to maximize their profits.

Don’t believe it?

“Some have proposed,– said Harry Dinham in 2007, then president of the National Association of Mortgage Brokers, “that a fiduciary duty standard should be implemented and mortgage originators and their loan officers should act in the ?best interests’ of the consumer. NAMB remains opposed to any proposed law, regulation or other measure that attempts to impose a fiduciary duty, in any fashion, upon a mortgage broker or any other originator.

“Simply put, a mortgage broker should not, and cannot, owe a fiduciary duty to a borrower. The consumer is the decision maker, not the mortgage broker,– says Dinham.

John Robbins, then chairman of the Mortgage Bankers Association, explained during June 2007 congressional testimony that “notably, MBA does not believe that a disclosure of function and fees is warranted for mortgage lenders. Unlike a broker whose role may be uncertain — agent or loan provider — a lender’s role is clear. A lender underwrites, approves and funds the loan. The lender does not hold himself out as an agent of the borrower. While a lender must serve its customers fairly, and the industry has done much to assure high professional standards, a lender owes a duty to its shareholders and investors. A borrower knows a lender offers its own products and does not offer to shop for borrowers.”

No Help For Borrowers

While the SEC is busily doing battle with Goldman Sachs, who is fighting for the borrowers who lost their homes? The SEC claims that 99 percent of the residential mortgage backed-securities (RMBS) in one loan portfolio had be to downgraded. Is there any possibility that loans which fail with such frequency were tainted from the moment of origination? Can lawyers claim an unconscionability defense on behalf of borrowers with such mortgages?

Lenders point out that borrowers signed all the paperwork and were free to decline loan offers. But who was the authority figure in the room? Upon whom did borrowers rely? Has anyone actually read their loan papers?

Mel Martinez, an attorney and former HUD Secretary under George W. Bush told the Washington Post, “you know if I’m a lawyer and the secretary of HUD and I’m not reading this junk, you know there’s work’ to be done fixing the system.” (See: “HUD Chief Seeks Simpler Sale Closings,” June 2, 2001)

Attorney and also a former HUD Secretary under George W. Bush, Alphonso Jackson, told the Washington Times that “I’m an attorney and I’ve had eight houses and I didn’t read all that mess. If I didn’t read it — and I doubt anyone around this table read it — then we can’t hold people responsible for not reading every line when they were closing their loan.’” (See: “Jackson: Mortgage fine print not read,” March 20, 2008)

What lenders won’t point out is this: Every loan, without exception, is underwritten. The lenders create qualifying standards for each mortgage product and have in place an extensive process to assure that the borrowers met all requirements. Lenders can decline questionable loan applications, something that no doubt would have happened were it not so easy to sell such paper on Wall Street.

To their credit, many small lenders did not and do not regard homebuyers as prey. Few community banks or credit unions, as examples, offered toxic loan products.

Think about it the next time you need a mortgage.

SEC — No Help For Mortgage Borrowers is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: borrowers, fiduciary, fraud, loan officers, mbs, mortgage, mortgage-backed securities, obligation, origination, OurBroker, predatory, unconscionability, underwriters, UpFront Mortgage Brokers, Wall Street

Think about stock. You buy stock in the morning and sell it in the evening. You flipped the stock. Does anyone care? No.

Think about a foreclosed property bought from a lender, a REO (real estate owned by a lender). You buy this morning and sell this afternoon. Does anyone care? Maybe. Here’s why.

Foreclosure Flipping

First, a trail of quick sales for a single property often suggests illegal activity such as faked appraisals, false documentation, and fraudulent closings and settlements. If a home is bought for $200,000 at 10 AM, sold for $225,000 at noon and re-sold for $250,000 at 3 PM you have to wonder what caused the sudden increase in value.

Second, to protect against illegal flipping the FHA and many private-sector lenders have long had a rule which says that they will generally not finance a property which has been sold within the past 90 days. In January 2010 HUD suspended the FHA 90-day anti-flipping rule for a year, meaning that you can buy a property today, a buyer can purchase tomorrow, and the buyer can get an FHA loan. For specifics and the latest details please speak with lenders.

To protect yourself when dealing with foreclosures and quick sales, be sure to keep good records of any repairs as well as before-and-after photos of the property to document why a higher price could be justified.

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This is very different from the S&L crisis of the early 1990s. Back then, says the Financial Times, almost 1,100 S&L officials and 2,600 bankers literally went to jail. (See: Insight: A matter of retribution, September 3, 2009)

“There are precious few other financiers behind bars, or facing momentous fines,” says the paper. “Compared to the S&L days, the level of retribution so far seems almost non existent.”

(The numbers cited by the Financial Times came originally from a Justice Department special report entitled Financial Institution Fraud (June 30 1995) as cited in The Great Texas Savings and Loan Financial Debacle By Tom S. King.)

Actually, there are several reasons why so few mortgage lenders have wound up in jail.

First, predatory lending is not a federal crime. It’s perfectly okay under federal rules to sell a borrower who qualifies for an FHA loan a subprime mortgage with a higher rate and steeper costs. If that more expensive loan ultimately leads to foreclosure and bankruptcy, that’s a problem for the borrower — the loan officer, the underwriter and the originating lender were paid long ago.

Some would make the argument that the borrower is entirely responsible for the mortgage because he signed the paperwork at closing.

However, two attorneys who happen to have recently been HUD Secretaries obviously disagree with this line of thinking:

Alphonso Jackson: “I’m an attorney and I’ve had eight houses and I didn’t read all that mess. If I didn’t read it — and I doubt anyone around this table read it — then we can’t hold people responsible for not reading every line when they were closing their loan.” (See: Jackson: Mortgage fine print not read, The Washington Times, March 20, 2008)

Mel Martinez: “You know if I’m a lawyer and the secretary of HUD and I’m not reading this junk, you know there’s work’ to be done fixing the system.” (See: HUD Chief Seeks Simpler Sale Closings, The Washington Post, June 2, 2001)

It should be fairly obvious that many lenders took advantage of a large number of borrowers by steering them into loan products which were costly, unneeded and filled with gotcha clauses. How do we know? The Wall Street Journal studied mortgages from 2005 and found that 55 percent of all subprime borrowers actually qualified for conventional financing. By 2006, 61 percent of all subprime financing went to borrowers who qualified for better — and less expensive — mortgages. (See: Subprime Debacle Traps Even Very Credit-Worthy, December 3, 2007)

Second, insider trading may be a crime for stocks and bonds but that’s not the case for commodities such as oil futures or derivatives.

As Damon Silvers, associate general counsel for AFL-CIO, told Reuters, “the Commodities Exchange Act does not recognize insider trading as a violation of law.” (See: SEC, CFTC urged to align rules to police markets, September 3, 2009)

As the great songwriter Woody Guthrie wrote long ago, some people will rob you with a gun — and some with a pen.

Mortgages: No Jail Time For Lenders is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: commodities, fraud, insider trading, lenders, loan officers, mortgage, predatory lending

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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Technorati Tags: fraud, legal, lending, mortgage, predatory

This is an unhappy statistic, but it does not tell the whole story. First, as the FBI explains, “the total dollar loss attributed to mortgage fraud is unknown.” This makes much sense given that fraud cannot be known until it’s uncovered — think of Bernie Madoff, Enron and Worldcom.

Second, there’s no central repository to collect mortgage fraud complaints thus the counting and definitions of one source may be different than another.

Third, and most importantly, the FBI report does not cite ONE instance of predatory lending.

Could it possibly be that in a one-year period there was not a single predatory loan issued anywhere in the US?

You’re kidding, right?

Predatory Lending Is Not A Federal Crime

The reason there are no predatory loan statistics in the FBI report is very simple: Although most mortgages originate from nationally-regulated lenders, predatory lending in not a federal crime so there are no statistics to report.

As Benny Kass explains, “there are no federal laws making predatory lending illegal.– Kass is a long-time real estate columnist with The Washington Post and a well-regarded real estate attorney.

In other words, if you make a material misstatement, misrepresentation, or omission on a loan application that can be regarded as mortgage fraud. However, if a lender sells a subprime loan to a family that qualifies for a prime mortgage and increases their housing costs by thousands of dollars per year, that’s just dandy — even if it drives them into foreclosure and bankruptcy. No crime there, no obligation to do what is best for the borrower.

Suspicious Activity Reports (SARs)

The FBI report reflects Suspicious Activity Reports (SARs) rather than actual fraud cases. Given that millions of loans are originated each year the number of fraud prosecutions is tiny. As the FBI reports, last year — in fiscal 2007 — there were 1,204 mortgage fraud cases. They produced 321 indictments and 260 mortgage fraud convictions.

The point, of course, is that the FBI cannot go after predatory lenders if predatory lending is not a crime. Can you guess which industry has worked zealously to assure that mortgage fraud is an issue — but predatory lending is not?

No Predatory Lending In 2008? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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