Anyone with eyeballs and a set of ears has either scene or heard at least one of a dozen news announcements that the FBI will be investigating IndyMac Bank for fraudulent practices. CNN writes that the government is looking into the bank engaged in fraud while granting mortgages to high risk borrowers. IndyMac is listed as well as twenty one other companies in the sub-prime market under investigation. I’m sure there will be more.
For those who are uninitiated the FBI has a terrific posting, listing of crimes and scenarios related to mortgage fraud. I would urge everyone to read it. It will provide a comprehensive overview as to how we have been hosed for the better part of this century, and who did the hosing. But for now let me give you the brief overview.
Here is a decent insight provided by CNN–“I would suspect they are looking at bad appraisals, bad underwriting, which would mean false statements on loan applications, some of which require federal forms to be filled out — so they can be prosecuted for the false statements,” he said. “I would also suspect they would look at false statements to the investing community for securities fraud violations.”
What this means is say there is a house on the market for $300,000. It’s a hot market to the normal precautions, due diligence, house inspections, common sense and closer scrutiny are thrown out the window in the bidding frenzy. Scammer one, the Realtor, whomever sells the house to someone he knows. He may sell it to another business front, or have someone stand in for a fee, say $15,000. He may sell it to his wife, his mother, whomever. Whomever he sells it to stands in for the mortgage. Whatever the price, it is inflated, say $500,000.
Thanks to certain arrangements, the “buyer,” qualifies for the inflated price. The realtor is on the take, as is the mortgage lender. Each is paid off nicely to grant a mortgage based on false documents or no documents fraudulently claiming that this “buyer” is earns enough and is worth enough that he or she qualifies for the loan. The appraiser is also on the take and appraises the house for the inflated value. Often the appraiser will use specious comps or comps taken from a neighborhood not too far away, but very different in true home value.
The bank grants the mortgage, holds it for ten seconds and then flips it to a hedge fund or some financial group seven billion light years away from the transaction. The house could be in Las Vegas, the ultimate lender who picks up the note could be in France. They don’t know the difference in neighborhoods. They don’t know that three blocks away the houses are $2 million, but here in this neighborhood they are in reality valued for much less.
Once the mortgage is secured, the “buyer” then flips it back to the “seller” or someone else in the ring. They put it on the market again, for an even higher price. And then maybe again. And then some poor soul buys it in the bidding frenzy of a hot market, only to discover he is in way over his head. He may have bought it on an interest only loan, or some other cutesy loan where he pays only a portion monthly of the true mortgage cost. He is told don’t worry, the house will always increase, he can take equity loans to pay the balloon payment coming due. And then the other shoe falls, reality sets in and there is a lot of collective whining about being bamboozled by unfair practitioners.
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Well this is just part of it. I tried to keep it simple. It can get pretty complex. As a background checking company who also conducts corporate investigation and corporate research we at Corra Group had had several mortgage fraud cases cross our desks, all with similarities, but also with variations on a theme. We realize theses cases, under pre-trial preparation, before the attorneys take them to court are but an infinitesimal fraction of the deceit fraud and outright crime that has taken place in the name of real estate commerce.
Okay, so now too late in my opinion, the game of musical chairs is over. There are no chairs left for these asses to find a seat. They want to be bailed out. They want recompense for their greed. In fact, what they have done is betray the public trust. They have betrayed the public trust as have politicians and media people and those involved in myriad white collar crime. They have ruined lives and cost billions, gutted pension funds and lied to anybody who would listen.
In a world where the kid on the corner running a three card monte game may get a stiffer sentence than these politicians and white collar criminals, something is terribly wrong. I propose we not only send them to jail but that we invoke corporal punishment. I believe whole heartedly that these betrayers of the public trust should be treated to a public flogging, before being flung into prison for a hearty sentence.
If we can allow for capital punishment then we can certainly make a little room here for the corporate variety. Frankly, I don’t think it will deter drug addicts or garden variety criminals. It would just be another speed bump on the road to desolation. But with the more high minded alleged reputable citizens of our fair country, flogging behinds would prove a very clear and concise deterrent. The mere spectacle of having their collective pants pulled down around their ankles and being flogged with cane or cat o’ nine tails for the benefit of public access TV would give pause to most crooked politicians and white collar criminals.
The reality of seeing their friends being flogged in living color would turn most into honest men. They would be forced to listen to the berating of their spouses, parents and in-laws. They would be admonished by all, reminded how awful it would for the children, how embarrassing for friends and neighbors, and how they have put on some pounds and wouldn’t look as fashion forward with big red welts on their coddled derrières
They may be capable of doing the time, but they may balk when threatened with the pine. We could even bring back the stocks, where the angry rabble could throw garbage and worthless mortgages at them. I believe this is not only a workable solution, but one whose time has come. As for these evil doers, to quote a President, these folks who believe they are privileged and entitled to operate beyond the law. Those who believe they can betray the public trust, well for their public flogging session, this is one time I wouldn’t mind them butting to the front of the line.
