LA Times: FBI Saw Mortgage Fraud Threat in 2004
Submitted by
CalculatedRisk on Mon, 08/25/2008 - 5:11am (60 comments)
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 42 members and 180 guests online.
Currently online
- Rob Dawg
- km4
- Oman
- wafdof
- sum luk
- energyecon
- Vic
- gabyjan
- Lurking Lawyer
- zephyrum
- Elvis
- curious
- shill
- fudge_hend
- 1 currency now -yogi
- Comrade Janošik
- Comrade Elmer Fudd
- glimmerman
- Mr Slippery
- dilbert dogbert
- Gubbmint Cheese
- Duke of Con Dao
- traderwalt
- Pearl
- Mook
- MikeCLT
- ac
- Cinco-X
- Basel Too
- Comrade Alexei Mikhailovich
- GrandOldTurkey
- Outsider
- dingojoe
- SPOOL
- Pellice
- TheEconomist
- mos maiorum
- ResistanceIsFeudal
- Haralambos
- Antipodes
- Gatsby
- Agronox
Recent Recommendations
And so here we are..
As early as 2001 the government saw signs of problems. HUD had to start working on rules for lenders that were "artificially inflating" prices of foreclosures.
In 2002 NJ came up with legislation against predatory lending along with other states that followed Georgia's lead in the matter. The federal government though came in to stop it on behalf of the banks.
By 2004 this was old news.
From an agency funding perspective, it makes sense for them to ignore the problem for as long as possible, as then the amount of resources needed to "fight" it grows exponentially.
Can't blame the FBI for wanting a bigger mess to clean up. Bigger problems require bigger budgets.
Mr. President here's our CIA daily briefing for August XX, 2001:
"Bin Laden determined to attack the mainland US"
Pres. Bush: OK, you've done your duty, now let me get back to cutting the brush here at the ranch.
Hoocoodanode?
We also are told not to worry about the majority population being replaced by 100's of millions of unskilled third world peasants.
Kunstler nails it again. This time with a 16lb hammer on a 10d nail.
James Howard Kunstler
See ClusterfuckNationChronicles.
That must be the reason why Louis Freeh (ex FBI director) joined Fannie's board of directors, a few years later. Maybe he is undercover. LOL
There are usually warning signs for almost all disasters.
Sometimes no one is able to put it all together before hand.
Sometimes the transfer of liability OR the "it's somebody else's problem" completely paralyzes any preemptive response.
Kunstler has no taste...
PS
Nether of the above are any excuse for inaction or carelessness.
Broker,
Maybe he just saw the wisdom in the old adage: "If you can't beat 'em, join 'em".
There are usually warning signs for almost all disasters.
Can you think of a disaster in which there was no warning sign, in retrospect?
Terrorist attacks?
Financial meltdowns?
Space shuttle disasters?
Wars?
Nuclear Power Plants?
Natural Disasters?
Super-Bowls?
The guy whose name has been referenced twice is a classic narcissist who offers nothing of value. Stop trolling for him.
DP:
I would say that the asteroid that struck the Yucatan.
Almost everything else takes longer than overnight to start and finish, and involves more than just one person who does not just land here from outerspace to commit catastrophe.
New Guy, I am afraid you are right. However, please let me hope he is working undercover. LOL
So, this FBI agent warned of people learning how to process and service a mortgage, but not successfully conclude one? And his warning was ignored?
This is the same FBI that....nevermind.
Mike2 writes:
From an agency funding perspective, it makes sense for them to ignore the problem for as long as possible, as then the amount of resources needed to "fight" it grows exponentially.
I like that theory. I read that the fight against drugs wasn't much of a concern until the end of prohibition and there was this big Federal bureaucracy that needed a new raison d'etre.
In a few years there will be all these mortgage fraud task forces looking for a new crisis. I have a feeling they won't need to wait long to find a new exploding problem...
10:00 a.m.
U.S. July existing home sales rise 3.1% to 5.0 million pace
10:00 a.m.
U.S. existing home sales down 13.2% in past year
10:00 a.m.
U.S. July inventory of exisitng homes at record high
In other words, despite a slight increase in sales M/M due to REO sales, inventory is still increasing. Boo-yah!
The FBI has become just another cafeteria bureaucracy. Rather than obey their mandate and do their job they instead pick and choose what they want to do and that only in context of empire preservation, turf wars and personal ambitions. Law enforcement at every level received hundreds if not thousands of demands of justice for Casey Serin and yet he remains free trying to do even more damage.
In 2004 the entire Federal Government, from FEMA, to the GSA, to the Justice Department, was mobilized to help the Bush/Cheney ticket. If they had started an investigation it would have shown people the house of financial cards that the banking industry (big donors to Bush) had set up, and show people that the economy wasn't as strong as Bush said it was.
Now the financial mess is like every other mess that Bush has gotten us into...Nero fiddles while he waits for the next president to put out the fire.
If only there were some other Federal agencies that had the power to take up the slack from the FBI and actually ride herd over the industry.
We also are told not to worry about the majority population being replaced by 100's of millions of unskilled third world peasants.
That started in about 1492 didn't it? Dipshit.
Just in time for the Democratic Convention [cue: 'Happy Days are here again"]
FRE up 6.4%, FNM up 2.4%
OH MY GOD I'M OUT OF MY MIND BAT-SHIT OBSESSED WITH CASEY SERIN.
CASEY SERIN HASN'T PAID HIS TAXES YET.
CASEY SERIN STILL OWNS THE HOUSE IN UTAH.
CASEY SERIN OWNS MY HOUSE.
CASEY SERIN CAN FLY.
WHERE IS MY MDEICATION?
Long Bond rippin!
JP writes:
10:00 a.m.
U.S. July existing home sales rise 3.1% to 5.0 million pace
10:00 a.m.
U.S. existing home sales down 13.2% in past year
10:00 a.m.
U.S. July inventory of exisitng homes at record high
The IS no spoon.
Windowdog: Have a cookie.
Keep in mind that regulators are frequently behind the curve on many scams due to statutory or mission statement restrictions on their activities.
I'm not excusing anything, but again we can trace some blame through the regulators back to Congress and the President.
Doesn't anybody wonder why the FBI is involved in mortgage fraud anyway?
Um, most of the criminal acts involved in mortgage fraud are violations of state laws. The only time you ever get a federal bust is on very limited elements of the crime, like wiring money across state lines to an out-of-state lender or something. Or "mail fraud" because someone had to send documents out of state. This is why, when the Feebs do mortgage-fraud-related busts, you see counts like mail fraud and wire fraud, not forgery or theft or, well, "mortgage fraud."
Why pick on the FBI? It seems to me that the states and cities with police forces and civil prosecutors have some 'splainin' to do.
Tanta, as I pointed out in the second link in my earlier posts, some states did try to do something early in this century, then the Treasury Dept came and pretty much overruled them.
But the lenders had little incentive to cooperate because they were [strike]continuing to make money.[/strike]
complicit in the scams.
This is a rerun of Reagan and the S&L crisis. He could have moved early to prevent it when he was warned. In rebuffing people trying to act he allowed it to grow to the size it did. I think his quote was "we don't regulate business."
Now Bush keeps the Reagan legacy alive by sitting back while the mortgage crisis mushrooms.
"If only there were some other Federal agencies that had the power to take up the slack from the FBI and actually ride herd over the industry."
Conjure Bag is available. He asks for payment on completion of the job. No upfront money required.
He wants a jet, a satellite phone, a few rolls of duct tape, a pair of rusty pliers, a bulk pack of dental floss and a federal grand jury on 24-hour standby to receive unsolicited confessions.
He swears that, within six months, the US mortgage industry will be the most honest and efficient on the planet or you owe him nothing.
How can you turn down a deal like that?
That story is a bit disjointed. The fraud committed by Joe the Loan Officer on Mary Homeowner is not what caused this. It was the fraud committed at the corporate level on a greedy Wall Street that did this.
Maybe the FBI should investigate the rating agencies.
"If only there were some other Federal agencies that had the power to take up the slack from the FBI and actually ride herd over the industry."
Put the mortgage business under the oversight of the SEC in addition to requiring licensing (ala Series 7) to be on the Federal level, not the state level.
Raising the bar off the floor would do some good.
Where was The FBI, FTC, SEC, FASB during his Ownership Society Bubble and where are there now?
Any personnel who track the nation's Suspicious Activity Reports could tell this. It does not take the FBI. We knew at the FDIC there was a growing problem. More than one examiner wrote widley circulated anonymous letters warning the higher ups. Nothing was done & taxpayers will pay the price.
I agree about rating agencies and fraud! The FBI has a few cases of mortgage fraud they always watch, but what about the hundreds of thousands of bonds, CDOs and securities that were mis-rated, mis-accounted for which all used discretionary abuse to mislead people with IMHO, falsified information? Why did the FBI never act on that or work with DOJ on the collusion which resulted in systemic failure? Where were the dumbass Homeland Security Reatrds on this national security issue?
FFDIC,
"Nothing was done"
Does that mean the examiners were not fired? That's one bright spot.
"Where were the dumbass Homeland Security Reatrds on this national security issue?"
They preferred to rendition Arab goat herders instead of New York underwriters.
What about accounting firms, FASM, auditors in this? We had the biggest scam since Enron and everyone in the foodchain either played dead or squirted more gas on the fire. The FBI represents apathy and a willingness to allow some laws to not be enforced.
most of the criminal acts involved in mortgage fraud are violations of state laws.
Yeah, but there is that line on the bottom of the forms about signing and perjury?
Re: "They preferred to rendition Arab goat herders instead of New York underwriters."
Homeland Security spends vast amounts of money protecting its budget, while doing little to help America!
I'm sure there was a lot of mortgage fraud and that it has contributed to the problem.
However, the price bubble is still the underlying problem. I don't recall any FBI warning that prople were overpaying for houses. Instead, I see somebody trying to claim 'credit' for issuing an early but ineffective warning for one component of a much larger problem. No big deal.
Buiter said the Fed's emergency lending programs are too generous. The U.S. central bank is making up to $200 billion of its Treasuries holdings available to primary securities dealers, and $150 billion of funds through auctions to commercial banks. In addition, banks are able to borrow directly from the Fed.
You don't let your borrower determine the value of the collateral offered to you,'' Buiter said.That's just crazy.''
Too Sympathetic
Buiter also reiterated his argument that central banks can fall prey to ``regulatory capture'' by financial institutions, growing too sympathetic to their needs when setting rates.
Two economists echoed Buiter's concern in another paper presented yesterday, saying the Fed's program allowing institutions to swap Treasuries for mortgage bonds and other debt enables firms to ``window dress'' their balance sheets.
Financial institutions can hold low-quality securities for the period where no reporting is required,'' wrote Franklin Allen of the University of Pennsylvania and the University of Frankfurt's Elena Carletti.Temporarily increasing the supply of Treasuries makes this kind of deception easier. It helps remove market and regulator discipline.''
The financial crisis is also forcing the ECB to rethink aspects of its money-market operations, which provide some flexibility compared with programs at the Fed and the Bank of England.
Re: It helps remove market and regulator discipline.''
Same deal with FBI, DOJ, FTC and market regulation! "they", i.e, wall street mafia, remove the cops and the rules at will!
10 yr treas
3.786
Wow!
But curve trade remains in a holding pattern with the 2-10-yr yield spread slightly flatter at 145.5.
Re: Risk-Taking Hits Investors In Leveraged-Loan Market: Risk-Taking Hits Investors In Leveraged-Loan Market - WSJ.com
"As a result, the rate of defaults -- instances where a company is unable to make its interest payments or meet the obligations in its debt agreements -- is higher in the loan market than it is in the junk-bond market, which has traditionally been perceived as the riskier of the two markets. To make matters worse, investors stand to recover less in leveraged-loan defaults than what was historically normal because of the riskier composition of the market.
"What that tells you about is the tremendous amount of poor quality financing in the easy money period of 2004 to 2007 and now, when the economy slows down, these companies have way too much debt and they're hitting the wall," Margie Patel, portfolio manager at Evergreen Investments, said. "It also tells you why loans have been trading, in general, at a substantial discount to face value."
"The average price in the loan market is around 88 cents on the dollar these days, according to Standard & Poor's Leveraged Commentary & Data unit, down from above 100 cents before the credit crisis."
Why is it after a crisis the FBI always says we saw that before it happened. They did with 9-11 and now the mortgage meltdown. With a few more disasters maybe the FBI could become more aware to prevent something rather than refer to it in the past tense.Talk is cheap.
MLB
--
Why do we have cops if their warnings are going to be ignored?
Because banking and finance Crooks control the govt, the Fed, and the economy and the agents of these Crooks overrule the cops. Corruption writ large.
The current American econo-political system is:
A system of the Crooks, by the Crooks, and for the Crooks.
A system acceptable only to born-and-bred dopes. Doping Americans, non-stop, is a necessity for Americas ruling elite. Hey, dopes, we have an election coming. You can vote for one of the many agents acceptable to the Crooks.
Democracy leads to the rule of the manipulators and propagandists. Americans' head is filled with garbage every day of his, or her, life. It stinks. There is no way out of prolonged misery for born-and-bred American dopes because they cant think of an alternative to the current political system. All historical knowledge has been rendered useless for these dopes.
Jas
"I'm sure there was a lot of mortgage fraud and that it has contributed to the problem.
However, the price bubble is still the underlying problem. I don't recall any FBI warning that prople were overpaying for houses."
The price bubble was the result, not the underlying problem. There wouldn't have been a bubble without cheap money, which was made available due to the fraud on the side of those selling over-rated crap as a quality investment.
In 2002, Ma & Pa Kettle could have bought a SoCal home for $600k with a 6.5% 5 year fixed. 18-24 months later the same house would sell for $1 mil due to the ability to finance it with an option arm that was fully indexed at 3.5% that every Tom, Dick and Harry could qualify for, which allowed the 20-40 offers per property bidding wars.
The run up corresponded with the declining cost of money. Chart the prices from Jan 2002 to May 2004 and you'll find that the rise corresponds to the drop in the MTA/MAT/CMT down to 1.2%.
I'm glad to see that the FBI's top sleuths figured out the terrible secret that had been a sour joke in Orange County, CA for years previously. Go G-men!
Tanta, as I pointed out in the second link in my earlier posts, some states did try to do something early in this century, then the Treasury Dept came and pretty much overruled them.
Tom | Homepage | 08.25.08 - 10:37 am | #
Your links refer to state predatory lending laws, not attempts to halt mortgage fraud.
The fraud committed by Joe the Loan Officer on Mary Homeowner is not what caused this. It was the fraud committed at the corporate level on a greedy Wall Street that did this.
BW | 08.25.08 - 11:16 am | #
I think there must be some confusion here on just what it is the FBI is referring to when they discuss "mortgage fraud". We're not talking here about greedy lenders defrauding borrowers, we're talking about borrowers defrauding lenders. Sometimes with inside help, to be sure, but it's the lender/investor who's been defrauded.
Yalt,
The problem started with lenders manipulating the markets. Then when lenders weren't or couldn't borrow they were encouraged to give false documentation in many cases.
On another site, someone recounted a story of an acquaintence walking into a broker's office and asking what he should put down for his income. The broker told him what to put down, the broker didn't check, the lender's underwriters didn't check. You can't claim assault if you're walking around with a sign that says please hit me.
The banks didn't care who was borrowing as long as they were borrowing. They were securitizing more and more debt, especially in the subprime market. All they cared about was writing new loans so they could instantly cash them in on wall st.
That's how predatory lending relates to this, they just wanted to write loans and did a bunch of things they shouldn't have to get people to sign.
It's part of the progression.
That fraud committed by borrowers was minuscule in scope compared to what was dumped on investors.
If the FBI was thinking in terms of lying on a loan app as the fraud that created this mess, then they are truly clueless.
"If the FBI was thinking in terms of lying on a loan app as the fraud that created this mess, then they are truly clueless."
Agreed.
We're not talking about a borrower who lies about his income on a stated income app--that's not the FBI's concern. We're talking about large-scale forgery of supporting documentation--false employment verifications, false W-2's, etc.
The FBI's concern is with fraud for profit, not fraud for housing, and their interest is primarily in fraud rings--straw borrowers, a broker, maybe a crooked title agent or appraiser or loan underwriter, all working in concert to defraud a lender.
She hasn't been keeping her webpage updated this summer, unfortunately, but the stories here will give you an idea:
Mortgage and Real Estate Fraud - Mortgage Fraud News
To be fair I should note that the biggest case on the first page here doesn't involve borrower fraud at all--it was a servicer who (1) didn't notify the investor when loans were paid off but instead kept the money and continued to remit monthly payments to the investor as if the loan was still in place, and (2) falsified loan payment histories on loans sold to an investor.
By the way, have a good firewall in place if you start digging around in this stuff. I just did a google search on one of the principals in that Olympia Mortgage case and the second website I linked to--supposedly a copy of a news article on the indictment--hit me with an ActiveX attack.
I get it Yalt, but this stuff still doesn't amount to enough to cause the IMB failure, let alone something the agent compared to the S&L crisis.
The point being that fraud for profit was made easy by the lenders' willingness to have underwriting standards just one step removed from fogging a mirror, then dumping the swill on investors with the blessings of the rating agencies.