A multi-million dollar fraud ring [subscription required] exposed in Atlanta may end up explaining more of the foreclosures than anyone imagined. Today's Wall Street Journal details the how the fraud ring got $6.8 million in mortgages from Bear Stearns (NYSE: BSC).
The Journal story talks about a New Yorker who told the bank that he and his wife earned more than $50,000 month as top officers of a marketing firm and submitted statements showing he had $3 million in assets, according to the federal fraud indictment. In reality, he was actually a phone technician earning $105,000 per year with only $35,000 in assets and his wife was a homemaker with no outside income. They bought a mansion for $1.8 and it recently sold out of foreclosure for $1.1 million. The scheme was exposed by neighbors who saw multi-million dollar homes sell for sky-high prices and then sit empty. People involved in this Atlanta ring are facing criminal fraud charges.
The FBI told the Journal that the percentage of white-collar agents and analysts devoted to prosecuting mortgage fraud is 28%. That's four times the number working on those types of cases in 2003 when it was only 7%. Lenders must file Suspicious Activity Reports when they suspect fraud. The number of reports being filed is up by nearly 700% between 2000 and 2006. In 2003 there were 436 active mortgage fraud cases and in 2007 the case load is 1,210.
Arthur Prieston, chairman of the Prieston Group, which provides mortgage fraud insurance and training, believes 2006 losses from mortgage fraud could total a record $4.5 billion, which is a 100% increase from the previous year, according to the Journal. Based on the increasing FBI caseload, I'll bet that number jumps even higher when the 2007 statistics are in.
Prieston believes that in some regions of the country half of all foreclosures may be due to fraud. He told the Journal, "We've created a culture where a great many people know how to take advantage of the system." This system he refers to are "stated income" loans, where little or no documentation is needed, also known inside the industry as "liar's loans." The Mortgage Asset Research Institute, another fraud protection firm that works with lenders, told the Journal it has found 60% of those stated amounts were exaggerated by more than 50%.
While people who are self-employed often must depend on these stated-income loans, if you do fall in that category you will have to jump through a lot more hoops to get a loan today as new mortgage rules are implemented. Unfortunately, as people learn to the game the system, honest folks get hurt in the process.
Obviously with all that's been exposed, it's clear that in the rush to make money and compete with other lenders for the business, financial institutions were lax in their fraud monitoring. Why did things get so bad? Who was watching the store?
Lita Epstein has written more than 20 books including "The 250 Questions You Should Ask to Avoid Foreclosure" and the "Complete Idiot's Guide to the Federal Reserve."
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Reader Comments (Page 1 of 1)
12-26-2007 @ 4:56AM
Barbara Ann Jackson said...
subject: FORECLOSURE FRAUD; Impediments to Justice; Freddie Mac and Wells Fargo; Mortgage Mess
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The long overdue call to IMPEACH judges like New Orleans federal Judge Thomas Porteous came on December 21st. New Orleans' cronyism and corruption has resulted in a BANANA REPUBLIC. Likely, the most manifest illustration of New Orleans judicial corruption is evident from deliberate methods the courts enable real estate property to become APPROPRIATED UNLAWFULLY from defaulted borrowers. It is HIGHLY COMMON for DEBT COLLECTOR attorneys to file foreclosures naming DEFUNCT mortgage companies; or naming mortgage companies which NO LONGER holds the NOTES; or AFFIXING 'ransom' amounts (the collectors' fee) far exceeding the "Acceleration Clause."
Despite a property owner's entitlement to Challenge CONTRARY-TO-LAW loss of his / her home, most property owners lack legal knowledge; the Court System is REFRACTORY; and there are limited attorneys with Consumer Law acumen. Undeniable facts and evidence such as court transcripts, pleadings, documents, and overwhelming PROOF of the accusations I am writing in this email is posted on my www.lawgrace.org website.
Although New Orleans' judicial illegalities are not unique to society, the NATIONWIDE MORTGAGE MESS & FORECLOSURE CRISIS WILL BE POSITIVELY IMPACTED by looking at real estate & mortgage racketeering schemes being OPENLY conducted by mortgage giants such as Freddie Mac and Wells Fargo of which Louisiana courts enable! See for yourself! Even see how -for purposes of accommodating cronies, courts issue rulings in favor of non-existent / never-served parties, AND MORE!
In fact, the longstanding, brazen conduct of federal Judge Porteous is consistent with how things are generally done within the Eastern District Federal Court System, located in New Orleans; of which the Federal 5th Circuit and the supreme court of Louisiana are also located in infamous New Orleans.
If it appears I have an axe to grind; I do, as I think of lives and businesses that have become irreparably harmed because judges take bribes or refuse to apply established laws. Unfortunately, Chief Judge Ginger Berrigan's sadness because corrective actions are finally being taken against Porteous discounts these stark realities. My advocacy is for purposes of doing what I can to make a difference for social good. If any of what I submitted appears to have merit, would you please consider helping by circulating my email or even raising awareness of my website or EVEN MY STORY(to media, legislators, Congresspersons, etc.), as I feel certain it will cause more broader examination and answers about the NATIONWIDE MORTGAGE MESS, and other factors which
affect the economy and social conditions.
**Here's a few links about corruption / foreclosure fraud:
"Viewpoint: Calls for Impeachment of New Orleans Federal Judge G.Thomas Porteous"
http://www.opednews.com/articles/opedne_barbara__071223_viewpoint_3a___calls_f.htm
"Mortgage Mess, Foreclosure Fraud and Impediments to Justice,"
http://newsblaze.com/story/20071203130614tsop.nb/newsblaze/TOPSTORY/Top-Stories.
“Casualties From New Orleans Ineptness and Corruption Coming To A City Near You”
http://www.lawgrace.org/2006/06/30/casualties-from-corruption/
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Sincerely,
Barbara Ann Jackson
Law & Grace, Inc.
www.lawgrace.org
PO Box 5373
Shreveport, LA 71135