Mortgage Fraud
“Although not all of our current economic ills are the result of criminal activity, the financial crisis has laid bare criminal activity … that may have otherwise gone undetected for years,” – Rita Glavin, acting Assistant Attorney General at the Department of Justice’s Criminal Division
I have to vehemently disagree with Ms. Glavin’s quote. I do agree that not all of our current economic ills are the result of criminal activity, although the vast majority of them are. Where I disagree is that it may have gone undetected for years. Bullshit. It was not undetected. It was blatantly and intentionally overlooked. It was swept under the rug in the interest of profit. It was the not-so-secret-dirty-little-secret in the mortgage industry for as long as I was in the business. In her defense, Ms. Glavin may not actually be aware of this.
In my over fifteen year career in the mortgage industry I worked in Underwriting, Quality Control and Operations Management. I worked for several different mortgage lenders (all now closed). In ALL cases, fraud was detected, confirmed, and very little, if anything was done about it. The penalty for being a whistle-blower or not going along with policies would be termination.
Some of the terms I heard from upper management in response to an employee detecting and attempting to report fraud were: “not a team player”, “digs too deep”, “not sales-oriented”, “looking to decline loans”, “not trying to make loans work”, “too conservative”, “deal-killer” and “uncooperative”.
In my role as a Quality Assurance Analyst, it was my job to verify the integrity of the data in the file. Having said that, even when I confirmed that fraud had been committed, there were no consequences for the perpetrators.
I wasn’t even allowed to use the word, “fraud”, when contacting a mortgage broker to explain my findings. I had to use the word, “misrepresentation”. How ridiculous is that euphemism, considering that the perpetrator had committed a criminal act? During a police investigation of a bank robbery, for example, are the investigating officers required to use similar euphemisms? Can you imagine a police officer telling a bank robber, “We have uncovered evidence indicating that ABC Bank was involuntarily relieved of $1,000,000.”? Of course not. They say it like it is, such as, “We have uncovered evidence indicating that you robbed ABC Bank of $1,000,000.”. Why would anyone be required to beat around the bush when confronting a criminal? Greed. They wanted more business from these folks, regardless of the quality. We couldn’t offend them by calling them on their criminal activity or they would take their business elsewhere.
Normally, the loan would be declined, the broker was put on a “watch list” and if no other misrepresentation was confirmed, taken off the watch list within a few months. That was it. Occasionally a broker would actually be cut off, but that was extremely rare, especially if the broker in question sent us a lot of business. We were window dressing so the investors buying our loans could package them as low-risk investments.
I came across this article this morning on Rain City Guide: Naughty Mortgage Fraud Mom Gets Life Sentence Instead of a Time Out. It’s about time that stringent penalties are enforced when mortgage fraud is confirmed. Unfortunately, it’s too late, the damage has already been done. However, continued accountability and enforcement are necessary for the future of the mortgage industry and our economy in general.
What I’m wondering is, when are the executives running the few lenders that are left going to be held accountable? It starts from the top down. Sure, the borrower and/or broker committed the fraud in the first place, but the lender is the one approving the loan anyway. The culture of production over quality is still very much prevalent, according to my former colleagues who are still working in the business. Underwriters’ decisions are still overruled by management for the sake of production. Yet the execs running the show and enforcing policies and procedures are still employed, being paid bonuses and not being prosecuted. It’s well past the time for the true perpetrators to be held accountable.
Thanks for stopping by!
You nailed the it on the head. Take it one step further however and ask why our government is not taking responsiblity for laying a heavy hand on Fannie and Freddie to allow Liar Loan programs to be taken to the streets.
UGGG!
I don’t blame our government. I blame the greedy execs running the mortgage companies, banks and wall street firms. They knew what they were doing and knew it was wrong. Having said that, now that the cat’s out of the bag, I don’t understand why they still have their jobs and are not being prosecuted.