Rampant Fraud & Felony Hires Amongst Mortgage Brokers
Over the weekend, I was hard at work on Bailout Nation. I wrote these paragraphs on Sunday:
"Mortgage brokers became very creative at working the system for evaluating mortgages. They kept track of the various standard and adjustable mortgages available from different underwriters. They astutely identified the "easier" banks, and steered applicants there.
And those were the legitimate brokers. Unfortunately, the unregulated mortgage industry seemed to attract all sorts of unscrupulous players. Unlike the stock market, mortgage brokers require almost no licensing or training in most of the country. After the 2000-03 stock market crash, many retail brokers found themselves looking for a new line of work. Some had simply tired of the daily market grind, while others where under investigation, suspended, or even permanently banned from the industry.
Many with "hard-sell" phone pitching experience found a ready and waiting home in the mortgage industry. A YouTube video (since pulled) from 2005 showed several mortgage brokers working the phones in a scene that looked like it came from the movie Boiler Room. Aggressive salesmanship, cold slamming, up-selling were all common. Many mortgage borrowers have claimed they believed they were buying a fixed rate mortgage when they were sold a higher commission, adjustable-rate mortgage -- with a significantly higher reset payment."
I was wondering if I wasn't being too harsh on these brokers -- after all, they all weren't corrupt criminals , and I am sure many are honest hard working folk.
Then I read this in the Miami Herald:
Gary Kafka, former body builder with a long rap sheet and violent past, wrote millions of dollars in mortgages in South Florida without ever applying for a state license.
Fresh out of prison after serving time for bank fraud, he never went through a criminal background check before selling loans. He never took a competency exam.
He never had to...
There are 3 articles in the series; 2 are already published.
Here's some more stunning details
Ex-convicts active in mortgage fraud
Thousands with criminal records work unlicensed as loan originators
• From 2000 to 2007, regulators allowed at least 10,529 people with criminal records to work in the mortgage profession. Of those, 4,065 cleared background checks after committing crimes that state law specifically requires regulators to screen, including fraud, bank robbery, racketeering and extortion.
• More than half the people who wrote mortgages in Florida during that period were not subject to any criminal background check. Despite repeated pleas from industry leaders to screen them, Florida regulators have refused.
• Confronted with a growing epidemic of mortgage fraud -- Florida now has the highest rate in the nation -- the number of license revocations declined over the last five years, leaving borrowers at the mercy of predatory brokers.
• During the peak of the housing boom, the Office of Financial Regulation ignored a state law enacted in 2006 that compelled it to perform nationwide criminal background checks on applicants. That failure allowed people convicted in other states -- and in federal court -- to peddle loans in Florida without any scrutiny.
• Regulators allowed at least 20 brokers to keep their licenses even after committing the one crime that seemed sure to get them banned from the industry: mortgage fraud.
The entire series is a brutal takedown of the mortgage origination and brokerage industry. Its a must read work . . .
Funny, there was no mention of any Predatory Borrowing . . .
~~~
>
Sources:
Thousands with criminal records work unlicensed as loan originators
MATTHEW HAGGMAN, ROB BARRY and JACK DOLAN
Miami Herald, July 20, 2008
http://www.miamiherald.com/static/multimedia/news/mortgage/originators.html
Ex-convicts active in mortgage fraud
JACK DOLAN, ROB BARRY and MATTHEW HAGGMAN
Miami Herald, July 20, 2008
http://www.miamiherald.com/static/multimedia/news/mortgage/brokers.html
Part 3 tomorrow
Monday, July 21, 2008 | 02:30 PM | Permalink
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Comments
It get's worse, this "reality" show concept came out just as the bubble was starting to burst. Look at this idiot, he actually thinks it was Gordon Gekko who originally said "Greed is good"
http://www.myspace.com/loansharkz
Posted by: Doc | Jul 21, 2008 3:01:02 PM
OT:
I haven't checked downstairs but I am surprised no one has said anything about Dick Bove getting sued by BankLantic(or is it BankAtlantic?). Good luck to the bank on being successful in that. Do they really want to open their books to Bove in this thing?
Posted by: Joe Klein's conscience | Jul 21, 2008 3:14:43 PM
these stories, about Felonious Mtg. Brokers, are stale..they are now being trotted out to justify the massive new regulatory arm that is on the FedRes' wish list. (funny, though, they couldn't afford to keep publishing M3 in '06, but..)
we better start understanding: PsyOp (s) because, if we don't, even the Cane won't help..
"A proven winner in combat and peacetime, PSYOP is one of the oldest weapons in the arsenal of man. It is an important force protector/combat multiplier and a non-lethal weapons system.
Psychological Operations (PSYOP) or Psychological Warfare (PSYWAR) is simply learning everything about your target enemy, their beliefs, likes, dislikes, strengths, weaknesses, and vulnerabilities. Once you know what motivates your target, you are ready to begin psychological operations.
Psychological operations may be defined broadly as the planned use of communications to influence human attitudes and behavior ... to create in target groups behavior, emotions, and attitudes that support the attainment of national objectives. The form of communication can be as simple as spreading information covertly by word of mouth or through any means of multimedia."
http://www.psywarrior.com/psyhist.html
~~~
BR: Um, your blase attitude towards massive private sector fraud and governmental incompetency screams of complacency
Posted by: Mark E Hoffer | Jul 21, 2008 3:20:22 PM
Nothing to see here folks, move along, its all stale stuff!
Really -- massive criminality on a huge scale, over a trillion dollars in losses, and you think this is a psyop operation?
The children were allowed to play without adult supervision, and they burned the house down. Guess what comes next . . . ?
Mark, Give me a break
Posted by: SF | Jul 21, 2008 3:25:46 PM
NPR's This American Life did a very good segment on the sub-prime mortgage debacle. Covers the mortgage brokers as well.
Posted by: Jason G | Jul 21, 2008 3:26:54 PM
Oh dood, it's like you've discovered a whole new genre of porn -- disgusting financial rotteness we all disapprove of, but want to hear all the details about. It merits some production values, like a map of the state with foreclosures and felon locations, and a scene-setting beach photo (with incidental cleavage). That would be a perfect mix of marts, charts and tarts.
Posted by: Roger Bigod | Jul 21, 2008 3:26:56 PM
That's very interesting that there were a handful to dozens [BR: not a handful -- 1000s] of people with a criminal background selling mortgages but within that statement is an implication they are guilty? So, if one spends time in the pokey, are they to remain unemployed for the rest of their life? No second chance?
Were those people also selling all of the mortgates to the Chinese, Middle East, Indian, Russian and European real estate booms as well?
"Unlike the stock market, mortgage brokers require almost no licensing or training in most of the country............"
It was the licensed Wall Street professionals that created this mess. That will become ever more clear as more shoes drop. Maybe we should have those mortgage brokers run Wall Street. It might be a step up on the ethics scale.
Posted by: bdg123 | Jul 21, 2008 3:28:43 PM
Oh dood, it's like you've discovered a whole new kind of porn -- the disgusting tale of financial rottenness we all disapprove of but want to know the ugly details about. All it needs is some graphics like a map of foreclosures and felon locations, and maybe a scene-setting beach photo, with some incidental cleavage. Marts, charts and tarts. Who could want more?
Posted by: Roger Bigod | Jul 21, 2008 3:34:20 PM
Hi Barry;
A little beside the point but .....
Please, can someone illuminate why Pimco's Mr. Gross is saying the Fannie & Freddie bailout is great and wonderful and must proceed? I am but a child in these matters. Or perhaps many of us great unwashed are about to lose all or any remaining respect for this gentleman's analysis - or should I say, opinions. Is this just a simple "greed over intelligence" politique, or am I missing something? Appreciate anyone's insight.
Posted by: jj | Jul 21, 2008 3:38:19 PM
JJ,
Just a guess, but this Bloomberg story may help.
The money quote:
"Eight of the top 10 holdings in Gross's $128.8 billion Total Return Fund were mortgage-backed securities guaranteed by Fannie Mae, according to data compiled by Bloomberg News as of March 31, the latest date for which figures are available. Mortgage securities made up 61 percent of the fund as of June 30, up from 53 percent a year earlier, according to Pimco's Web site."
Posted by: Estragon | Jul 21, 2008 3:48:35 PM
Truly amazing - I think I'll bookmark this and hand it out whenever someone makes the argument that individuals are more to blame for taking the loans than for the companies that originated the loans. Not that some individuals aren't to blame - but you have to remember that there was no requirement that the brokers give the people the loan other than greed.
Posted by: Damian | Jul 21, 2008 3:51:00 PM
I'm highly dubious of a claim that there are thousands upon thousands of criminals out there selling mortgages and that we somehow want to pin lax lending standards -THAT ARE THE RESPONSIBILITY OF BANK CEOS - for the housing mess.
And, if someone could provide a list of people convicted of something more than a DWI - and there is little way to prove this given your thesis is that they didn't even run a background check so how would anyone know there are thousands of criminals involved?
Then, I have to go against everything our form of justice espouses and believe all of these mythical thousands of people are guilty at everything they undertake for the rest of their lives.
This is very unlike you to post something like this. This is a Wall Street problem.
Posted by: bdg123 | Jul 21, 2008 3:58:08 PM
bdg123
he's in total denial and becoming part of the problem by overlooking the real reason for this mess. Why has he not addressed the farce of short-sale "limits"?
I totally expect this (and the other posts) to be removed in a few minutes time
Ciao
MS
~~~
BR: No, just the ones that make it clear you haven't read the post . . .
Posted by: michael schumacher | Jul 21, 2008 4:04:17 PM
It's not the prior convictions I'm worried about. I'm looking forward to thousands of NEWLY MINTED felons....
Posted by: Defator Mouse | Jul 21, 2008 4:13:04 PM
BR,
Is this post intended to imply that mortgage industry problems were caused by criminal activity?
It seems to me the causality more likely runs the other way. Money for nothing and chicks for free has always tended to attract a certain type of person. That fast buck types were attracted to a booming mortgage market isn't at all surprising.
Posted by: Estragon | Jul 21, 2008 4:16:04 PM
I wish I could remember the name of the mortgage company but I heard their advertisement on the radio this morning.
No down, 100% home financing. 30 year fixed rate. Over the phone approval. FHA approved. Bad credit? No problemo.
I've heard the ad before. If I hear it again, I'll try to pay better attention.
Posted by: engineer al | Jul 21, 2008 4:16:37 PM
Do you people actually bother reading the post and the articles before posting your moronic comments?
Posted by: ChrisG | Jul 21, 2008 4:31:46 PM
MS or BDG, BR is not limiting blame on this debacle to the type of people he highlights in this thread.
I don't see reason to "disagree" with BR here.
Posted by: wunsacon | Jul 21, 2008 4:35:15 PM
t's wht h dsn't r hs nt ddrssd s th ss hr. Cntnsly ffrng p th "t's th mrtgg brkr's flt" jst msss th whl pctr.....nd ths s "th BG PCTR" sn't t??
gss t s f y nly gr tht t cn b plcd t th ft f th mrtgg bnkng ndstry...srry bt tht's nt "TH BG PCTR" nd h knws t.
h's jst btchy bcs clld hm t fr slppy pst rlr tdy.
C
MS
Posted by: michael schumacher | Jul 21, 2008 4:45:44 PM
I think BR is just pointing out the rampant fraud (and in many cases by those with criminal records) and lack of any standards or licenses that was a big part of this mess. Of course it's systemic Wall St problem, but BR is just reporting this one component to a wider problem, so let's all chill here.
Posted by: Jeff | Jul 21, 2008 4:46:57 PM
Michael - I normally find your comments interesting, but you seem to have gone off your meds. Covering one part of a topic does not require covering or recovering the other areas. That's why they are called posts and not books. Jumping to "welcome to USSR" is just plain silly.
Posted by: Lostinthewoods | Jul 21, 2008 4:56:36 PM
Time for Mike Shumacher to get his own blog.
Posted by: MitchN | Jul 21, 2008 4:59:21 PM
Thank you Chris!
Today, I unpublished one Flame war a commenter had with himself (he agreed with me, and told me what a dick I was for doing so).
Another thread that it was readily apparent the posted had not read beyond the headline -- not my post, not the referenced article.
Lastly, someone who accused me of anti-semitism for failing to delete spam comments fast enough.
Seriously, people -- READ THE POST, AND THE REFERENCE MATERIAL BEFORE COMMENTING.
Posted by: Barry | Jul 21, 2008 5:02:43 PM
Plenty of good fraud and criminal references here:
http://www.mortgagefraudblog.com/
Posted by: Jojo | Jul 21, 2008 5:18:33 PM
>> For the record I never called you a name but hey if you want to make things up that's just fine with me. You have quite an ego
MS, I haven't been privy to the deleted notes but I don't think BR said *you* did.
C'mon, MS. I'd like to "second" Lostinthewoods' comment. I enjoy reading your often pointed remarks. But, today, I'm having trouble relating to your posts.
Posted by: wunsacon | Jul 21, 2008 5:34:30 PM
