How a Loan Becomes a Scam
By Barry Ritholtz - March 10th, 2009, 10:30AM
The Seattle Times has an interesting look at Mortage fraud cases, showing how real-estate insiders were scamming the system for profit:
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Former Bellevue loan officer is expected to appear for sentencing in federal court after pleading guilty to conspiracy in connection with submitting fraudulent loan applications to lenders. His sentencing comes as law-enforcement agencies are being inundated by banks with suspected mortgage-fraud reports.
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Source:
How a loan becomes a scam
Sanjay Bhatt
Seattle Times, February 27, 2009 at 12:00 AM
http://seattletimes.nwsource.com/html/localnews/2008791870_brooks27m.html
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March 6th, 2009 at 1:20 pm
Yawn
Shake me, wake me when we have some real news.
Now let’s move on to the ‘Quote of the Day’
In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten. -Peter Lynch
So, esteemed traders like Mr. Lynch, are only 10% better than a coin flip?
I get it.
March 6th, 2009 at 2:57 pm
@FL: depends on whether they’re inside or not and the scale of the 10%. Dink around the edges in a small way, but get the big deals done.
March 6th, 2009 at 2:58 pm
An aside about the newspaper business.
They are dying, they loaded the gun, pointed it at their temple and pulled the trigger.
Oh, it’s the internet’s fault, wrong answer.
They died when they abdicated their role as the fourth estate.
This country can not function without a watchdog press, when they became the mouthpiece of the gov, they sealed their fate.
Now they are just in their last dying throes, blood leaking from their ears, the wound was inflicted long, long ago.
March 6th, 2009 at 3:09 pm
@FL: 6 is 20% higher than 5, not 10%. And as usphoenix stated it’s not the frequency that matters, its the magnitude
March 6th, 2009 at 3:19 pm
Short version:
Builder, banker, and appraiser are in cahoots: Value of asset is jacked up. Buyer commits fraud on loan application, while Banker’s loan officer and his buddy – the RE agent/broker look the other way (all the while assuring buyer that it’s okay, ’cause everyone is doing it). Buyer purchases fraudulently assessed house – counting on endlessly increasing values to get out of dodge should the need arise (wink and nod to appraiser, loan officer, and RE agent), builder reaps huge profit margin, RE and loan officer take commissions, fees, and bonuses. Meanwhile, banker gets regular bonuses, and sells securities he creates from mortgages he knows will go bad, and which he gets the appraiser’s brother-in-law – who works for a ratings agency – to rate the securities AAA+ double big-time good. To keep the skim going, he purchases some of the securities himself, on behalf of the bank. At their weekly strip-poker game, bankers eventually cop to the scam and figure the best way to protect themselves is to buy insurance against the securities they have created. They call this new insurance a CDS (which stands for Deadly Economic Viral Plague), and they get the Ratings Agency connection – after getting him drunk and buggering him over a conference table at the Ritz in Naples – to bless them. It all turns to shit, eventually, and everyone goes broke. The taxpayer is left holding the bag.
Simple.
March 9th, 2009 at 2:51 pm
Where is the legal system? Taking a long lunch? Like the entire decade, maybe? Obama doesn’t help when he says things like “I want to look forward, not backward”. That might sound forgiving, but I don’t recall hearing any forgiveness being demanded or offered. Such talk only soothes, reassures and emboldens the thieves responsible for this mess.