Let the perp walks begin! Seattle Seven charged with fraud!
From the Seattle Times:
In one instance, according to U.S. Attorney Jeff Sullivan, a house cleaner who made no more than $20,000 a year qualified for a $1.2 million loan for a house in Medina because her application said she made $45,000 a month — which was news to her when asked by federal agents, according to court documents.
Sullivan said the case was complex and ongoing, and that the amount of the loss will likely grow, and possibly the number of defendants.
As the indictments were unsealed Thursday, more than 50 federal agents executed search warrants at the offices of Kobay Financial Corp., Nationwide Home Lending and Emerald City Escrow, which has been at the heart of the yearlong investigation, according to Inspector Robert Bethel, who runs the Seattle Division of the U.S. Postal Inspection Service. Agents also searched the homes of the defendants and several safe-deposit boxes.
Comments
I don't care how bad this woman's education is. When you fill out mortgage documentation they tell you what your monthly payment will be, if you make less than $1500 a month and they tell you your mortgage payments will be in excess of $5000 a month, you are responsible for noticing those numbers don't add up.
How many years do you suppose someone like this ends up doing?
Sigh. Cleaning person is just a euphemism for someone who cleans for a living but doesn't have the stability of a janitor. This code-word nonsense is what happens to a normal brain when it recognizes an apparent pattern that many of the people willing to do the hard work of cleaning for the lowest wages also happen to be immigrants. No matter how you cut it, this was fraud, and I'd still like to believe our court system is color-blind.
It shouldn't have even gotten to that point. I don't know what she was smoking to believe that she should have been even looking in the general direction of houses that cost over a million dollars on $20k a year. There was no way she didn't know that something was not making any sense.
I wonder why they even bothered to doctor the documents. You think at the height of the fraud boom anyone even bothered to read them?
Vladislav's comment is fifth up from the bottom:
http://mortgagefiduciaries.com/2008/06/ ... mment-1443
However, I think what he says on this post is even more interesting. 12th comment up from the bottom.
http://mortgagefiduciaries.com/2008/06/ ... lic-radio/
If the consumer complaint or investigation starts out at the state level and the state examiners discover that the fraud crossed state lines, they bow out and give the case to the FBI.
When a loan funds, money is transferred from one state to another via wire so they get them on wire fraud.
The FBI is also the enforcement mechanism for HUD.
Here's how it works. The seller has a loan for a million. They bought the house from a person who has a loan for $750K. The seller is selling for $1.5 million to some one who can afford to take the hit to their credit. The buyer can some times be paid or told they will be selling the home for $1.7 million in a few months.
Either way the people who set up these progressive sale loans usually have a stake in the proceeds.
The buyer or signer on the note makes little difference to the bank. The bank simply needs plausible deniability. The loan originators were instructed to generate loans. That is the term Loan Originator, it is plausible deniability. We blame the buyer, the Loan Originator, or the seller or Real Estate agents, but the bank makes the money.
We are now looking at who is left holding the remainders in the bag, but along the way banks, and investors made tons of money.
The loans were sold in bundles. Those bundles became the basis for profits that made the stock market look good. You bought stocks in companies that showed paper profits. Now you pay, but the buyer was only a very small cog trying to make a couple of bucks.
Ding, ding, ding, ding!
We have a winner!
This has been pretty much common knowledge for a couple years, now. Here's a cartoon to help you understand the rest of the details:
http://seattlebubble.com/blog/2009/02/2 ... isualized/
The banks always seem to get a free pass. People talk about bank losses, or getting credit moving again. The perps are the ones who engineered this system.
In this case, the bank probably gets a free pass because they are presumably the losers in this deal. If, the bank just passed the debt onto bond holders, I would think the bond holders should have some capability to sue the bank for gross negligence in cases like this...it's just too hard to do with the way loans were sliced and diced.
I suppose in the end, the only risk that CDOs actually mitigated was the risk that bankers might go to jail.
Also, with regards to this story, the vitrol is for the buyer because many of these buyers seem to be seeking sympathy. "Woe is me, I got suckered into this shell game," they say. I think it's this attitude of no-responsibility that really raises people's hackles. The borrowers for overpriced homes were every bit as responsible as the bankers for this boom and bust. Until we as a country get passed pointing fingers and take our knocks, we won't ever really get past the last decade.
WaMu sure got a free pass. Shareholders wiped out ... . Thousands of employees fired ... . Executives having to live on seven figure severance packages ... .
No winners there.
Owner X knows their house is worth $500k. LO and Owner are friends. LO says he can get a buyer and split profits with Owner. LO qualifies and gets a loan for a buyer at $1m. The $500k is their fraudulent profit. Buyer gets $10k or whatever for signing off on this. The other part is when the Buyer gets the keys the LO finds another Buyer for this same house 6 months later in order to reappraise at new value for $1.5M.
Reviewing what these guys did is funny as to how every knuckle head that does anything of this sort out there buys a Lambo or a Ferrari, and always has a name that ends with "sky".
Hopefully they will go down for the full 30 however reality is for good behavior they will probably go for 5-7 total.
Unfortunately won't deter people from doing this later unless third party origination rules and guidelines are changed.