mortgage fraud

$849 Billion in Fraudulent Securities Bought By the Fed: What Are They Going To Do About It?

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Guest post by Charles Seavey

The Federal Reserve owns $849 billion in mortgage-backed securities. Total reserves are $2,872 billion, so mortgage-backed securities comprise 30% of reserves. (No wonder the dollar can’t bounce, even with Europe falling apart.)

See: http://www.federalreserve.gov/releases/h41/Current/

To give a sense of the scale of this unprecedented investment in questionable private securities, currency in circulation is $1,052 billion so the Fed owns almost as many mortgage-backed securities as there are dollars in existence.

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Auditor reveals how risky mortgages were allowed to go through

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NPR featured a story on Tracy Warren, an auditor at Watterson-Prime, a quality control contractor who reviewed subprime loans for investment banks before they were sold on Wall Street. (The biggest client of Watterson-Prime? Bear Stearns.) She has over 25 years of experience in mortgage lending and her job was to find bad loans and say no.

Warren says that when she’d reject (kick out) a loan, her supervisors would overrule her and the loan would be approved. She says that they’d justify overruling the kicks, yet the applicants clearly weren’t qualified, often with very poor credit scores or income that wasn’t verified and didn’t pass the smell test.

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Why Business Owners Should NEVER Hire Family Members

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Under no circumstances should a business ever hire family members of current employees. I don’t care how good the current employee is or how good the potential employee seems. No “wife of the CFO to help with the books.” No “son of a sales guy to help with office work.” No “brother of our VP to work in sales.”

No matter what position either family member is in, it’s not a good idea to hire more than one because the chance of collusion for the purpose of committing fraud skyrockets. Is there a study that says so? Not that I’ve seen. I’m just basing my statement on my practical experience and the number of cases I’ve seen with family members committing fraud.

Take this Milwaukee area fraud at Parkview Title Service. Mom (Bobbi Moths) hired her daughter (Jamie Wilson). The daughter had serious financial troubles, and I’m sure the business owner had no idea.

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Mortgage Fraud Moving up the Priority Ladder for Prosecutors

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Mortgage industry professionals are facing increased scrutiny by federal prosecutors in Houston, Los Angeles, Phoenix, and New York, according to the Wall Street Journal. The FBI reports that 1,200 mortgage fraud cases are currently under investigation, compared with only 436 in 2003 and 818 in 2006. The Bureau wants to make it clear that mortgage fraud is a priority.

Last year, the FBI received over 35,000 reports of mortgage fraud, which totaled almost $1 billion in losses. This was over 5 times the number of reports in 2003. In 2006, there were 204 federal mortgage fraud convictions, which generated $388 million in restitution and $231 million in fines.

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Have You Been Taken by Mortgage Fraud?

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I read a great post on the Bankruptcy Law Network. Of course, their example is exactly like a situation someone recently brought to my attention. Jonathan Ginsberg writes the following:

Here’s how one version of a classic mortgage fraud scheme works: my client is approached by a friend or acquaintance with an opportunity to participate in a profitable real estate investment. The “friend” has a friend who is in the real estate business and he knows of a neighborhood where there are good deals on rental properties. In many cases these rental properties already have tenants. The “friend” can also arrange financing in which my client does not have to put any money down and the debt service (i.e., the mortgage) will be covered by the rental income.

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