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I have posted this in another thread, but i wanted to let people know that there is a law against a lot of the wrongs happening in the foreclosure world, and it is a crime.
It's always been a crime. And there's a lot more crime that has been committed by a lot more people, banks, corporations for the FBI to handle. Add to that the fact that Bush moved most of the FBI to work in Homeland Security matters and you won't see much done.
As I understand it, the FBI has dedicated an entire division to mortgage fraud now. And they are going after the big offenders first. I receive daily reports of people being nabbed for mortgage fraud.
It will take a while before it is all fixed. But we didn't get to this point overnight and it won't be fixed overnight either ......
There are variables within the concept of mortgage fraud:
Consumers commit fraud when they misrepresent or omit information to obtain a loan, that they would not otherwise qualify for had they been truthful. Regardless of the mouse traps established by lenders to detect/prevent consumer fraud, the mice grow bigger and proliferate faster.
Then there are lending agents who facilitated consumer fraud.
This is different from predatory lending which occurs when the consumer is deceived by a lending agent.
Foreclosures in my area have, thus far, remained an exception. For this reason, it is easy to spot patterns and there are indeed patterns.
I have read ( does not make it true) that as many as 15-20% of all mortgage applications are fraudulent. It pales in comparison to insurance fraud and then there is tax fraud.
This speaks volumes about our culture.
Last edited by middle-aged mom; 11-21-2008 at 09:53 AM..
Foreclosures in my area have, thus far, remained an exception. For this reason, it is easy to spot patterns and there are indeed patterns.
I have read ( does not make it true) that as many as 15-20% of all mortgage applications are fraudulent. It pales in comparison to insurance fraud and then there is tax fraud.
This speaks volumes about our culture.
I don't even want to know the percentage of resume fraud.
Here's an example of of mortgage companies commiting fraud. I had worked many times with a man who worked for a well known mortgage company. He was very on the up and up and did things honestly. He then went to work for another company.
After he left, I moved again, but wanted to stay with this "well known" company, so I just called their customer service number to get a new mortgage instead of dealing with a local contact. They tried to convince me to go with a certain type of mortgage to get a better rate. All I had to do was say X and that I could prove X, if they were ever audited. But don't worry, they "NEVER" get audited so I wil never be asked to prove X. Wink Wink.
I ended up going back to my original guy and the new company he worked for.
No /low doc/stated income loans have been around for 25 +/- years.
They were designed for self -employed people who had tremendous, often seasonal, variance in their income.
What happened during the housing bubble mania was that the no/low doc loan was increasingly "layered" with other loans, 100% financing, interest only, negative amortization, teaser arms and others.
Something like 45 % of home buyers, in the post 9/11 mania had no skin in the game. It is a stretch to call them homeowners. Without skin in the game, you just walk away when it's no longer fun to play- when it becomes apparent that your team is going to lose the game.
There is no doubt that some buyers " layered" because they were financially savy enough to do so and indeed had the financial resources to balance the risk.
The overwhelming reason however, was too many bought into the mania and were willing- desperate- to buy, at any terms, because they had the perception of now or never. They bought into the mania that they could sell at a substantial profit, if and when, it became necessary.
It was viewed as a ticket on the Express Train to Easy Street. It was wild and crazy speculation.
Having said all this, average home values have been out of synch with average incomes, in many areas for at least the past 10 years. We were already overdue for a minor, almost routine market correction, before 9/11.
And had 9/11 never happened, that's probably what would have occured.
Instead, interests were reduced to juice the economy and the rest is history.
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