Posted on 09/18/2004 12:24:54 PM PDT by Bobby777
WASHINGTON (CNN) -- Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an "epidemic" of financial crimes which, if not curtailed, could become "the next S&L crisis."
Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions.
"It has the potential to be an epidemic," said Swecker, who heads the Criminal Division at FBI headquarters in Washington. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
In the 1980s, many Savings and Loans failed because of poor management, risky loans and investments, and in some cases, fraud. Taxpayers were left with a $132 billion tab to cover federal guarantees to S&L customers.
The FBI has dispatched undercover teams across the country in an urgent investigation into dealings by suspect mortgage brokers, appraisers, short-term investors, and loan officers, Swecker, flanked by FBI executives and Justice Department prosecutors, revealed.
(Excerpt) Read more at cnn.com ...
Lenders are scared-to-death of denying ANY loan then being sued for "discrimination."
This will certainly contribute to an oncoming a crash.
They don't say what the crooks are doing, other than that it's "fraud." What the heck are they talking about?
What kind of frad?? There is no information on the types of fraud that one should look out for.
and there was an "organized ethnic group" involved that they refused to identify ... ummmm
Atlanta is the worst!
Fake appraisals, fake tax returns, fake customers.
The mortgage brokers are either setting up bad paper
or lenders are selling fake loans to other lenders!
yeah, I always do exact title searches most often. Thanks
I once had the opportunity to be a whistleblower against mortgage fraud. After four or five days of blowing the whistle, I concluded that the companies being defrauded could not have cared less. I still have a few hundred pounds of documentary evidence in my garage, a monument to naivete.
Whitewater anyone?
Back in the 1980's, the rampant fraud then was pinned on inept real estate appraisers that would inflate the value to whatever level the mortgage lender was willing to make a loan. When these houses came back in on a foreclosure, the liquidation value was often for 20-30% LESS than the remaining mortgage obligation. Response - mandatory licensing of ALL appraisers, with strong emphasis on the "ethics" training, and harsh penalties for failure to comply. Well guess what, appraisers aren't even much involved in home appraisals any more, something called an "Automated Valuation Module" is used to set the loan value on homes now, particularly refinance loans. But like the error to which Appraisers were prone to back in the early 1980's, houses tended to be overvalued for the market, and the loan-to-values are getting badly skewed once again. Almost ANYBODY can get a 100% loan, which with various fees and all, is really about a 105% loan-to-value.
And because the level of interest rates is relatively low, the monthly P&I is relatively low as well, encouraging buyers to purchase a higher-value house than they would ordinarly could, when interest rates averaged somewhat to MUCH higher. When these adjustable rate mortgages are once again adjusted up to more historic levels, a LOT of people are going to be priced out of their homes.
Yeah, there is a crisis coming.
Looking at the bright side, it does again show how our economy is booming.
However, the perps of fraud, when taking advantage of it, should get a barred window for life!
I am myself very interested in what exactly the scheme is. From what little I have read, it appears that the fraudsters need at least one corrupt appraiser; a series of sham sales occur (I believe among several physically proximate houses), and at the end, having jacked the prices up, find other people credulous enough at the end to pay vastly inflated prices.
Now, that actually sounds an awful like the bubble conditions going on all over the nation, except for the corrupt appraiser; I am interested in how they distinguish these sham sales from ordinary ones -- perhaps there are only a few names on a number of transactions in a vicinity?
But that happens a lot for instance with real estate agents who have been wheeling and dealing like mad -- there have been a number of times in the last two years that even in the evening that when we are in a group of people, and either a real estate agent is wheeling and dealing on a cell phone or buttonholing people to buy, buy, buy. I remember talking with at least one real estate agent who personally had bought several properties with the idea of flipping them quickly.
I'm wonder if the broker who screwed up our mortgage last year is going to be included in this probe?????
McVain was tied to that S&L crisis theu Keating, wasn't he???
Some loans for homes are backed by US government...Fannie Mae Mortgages, VA mortages, Farm Home Mortgages, etc.
What is happening is the homes being mortgaged aren't worth what they are loaning, or loans are being given to people who really can't afford to pay them back, income ratio to debt or too much debt already, based on both incomes,etc. The Mortgage Broker is charging heavy fees, upwards of $4-5000 dollars at closing. That is the fraud...these mortgages will not be paid back, and these houses won't sell for amt borrowed...leaving government holding the bag and the taxpayers money lost for the guarantee on the mortgage.
A 100 of those lousy loans nets the Fraudelant Mortgage Broker almost $400,000-$500,000 dollars for his selling them the loan. Legitimate brokers are afraid to deny these loans as many are minorities,elderly or very young females...so they risk discrimination suits. So both greedy fraud brokers and legitimate mortgage brokers are breaking the taxpayers.
I don't claim to know a lot about it, but this is fairly close to what is happening as it was explained to me.
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