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Bank Mortgage Fraud 101


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I was watching 60 Minutes the other day when a story aired that truly piqued my interest.  The story focused on some blatant – and I do mean blatant – fraud practices that most of the major US banks were doing to approve as many mortgages as possible during the white-hot market of the mid 2000’s.  Whether you have income property or just your home, you will not believe this!

Basically, during this time banks were creating mortgages so fast that shortcuts were taken with regard to the legal paperwork trail.  This includes mortgages associated with income property as well as owner-occupied property.  In fact, official mortgage closing documentation was omitted on hundreds of thousands, if not millions, of mortgage transactions.  So what did the banks do?  They hired a now defunct company called “Docs” to create phony documents and forge signatures.

The 60 Minutes story interviewed a couple former Docs employees.  They were hired off the street with no training whatsoever, with their only job responsibility being to forge signatures on the bogus paperwork.  One former employee said he made $10 an hour to do this, and was required to sign the name “Linda Green” to at least 350 documents an hour.  This particular employee alone forged over 4,000 mortgage documents, and in total the company operated for at least 3 years. 

During the time when the market was rapidly appreciating and everyone was making money hand over fist, no one seemed to be willing to pull back the curtain and investigate.  The fraudulent mortgages were rolled up into mortgage backed securities and other questionable investment vehicles, so in a sense the omissions were hidden.  But now with the rapidly increasing number of foreclosure properties hitting the market (projected at 1 million in 2011), these practices are finally getting exposed because homeowners who choose to fight back are discovering that in many cases the legal paperwork is either fake or missing.  

So what US banks engaged in these shady practices?  How about Citibank, Wells Fargo, US Bank, Bank of America and at least a half dozen more.  In fact, the problem was so pervasive that the head of the FDIC has proposed having the banks create a multi-billion dollar fund to handle the inevitable lawsuits. 

Although what the banks did was absolutely disgraceful, the good news is that anyone facing the prospect of losing their home through foreclosure now has a great chance to fight back…and win.  I honestly hope these banks lose billions of dollars over this, and that some bank officers will be criminally prosecuted, because that is clearly what they deserve.



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