Saturday, May 10, 2008

Mortgage Loan Executives Charged with Fraud

Two former executives of a large mortgage company were arrested this week and charged with fraud.

Lieb Printer, a former officer of Olympia Mortgage Corporation is charged with scheming to defraud Fannie Mae of more than $44 million. Here is how it worked: Normally when a loan is refinanced the existing mortgage is paid off. Printer was refinancing loans but instead of paying off the existing loan he was pocketing the money. To hide his actions he did a variety of things such as altering the credit report of the borrower so the old loan which was supposed to show a zero balance, simply did not appear on the customers credit report. He did this on 257 loans! The new loans were backed by Fannie Mae and sold to Credit Suisse First Boston.

Barry Goldstein, also formerly of Olympia, is charged with creating dummy loan histories for the borrowers so they looked much less risky on paper than they really were. Mr. Goldstein is also accused of directing his employees to create dummy loan histories for borrowers. If convicted they could each get 30-year prison sentences.

If found guilty I hope they both get the book thrown at them. They deserve to sit in prison for the next 30 years. There are a lot of factors contributing to the mortgage crisis we are facing and one of those factors is fraud and corruption. Unfortunately this story is not getting very much attention. The above story I read on page 15 of the Financial Times, a publication that I only rarely read. I was traveling this past week and picked up a copy at the hotel at which I was staying.

I often wonder why some stories get very little coverage and other things that I think are much less important get massive coverage. In my opinion this story should be front-page news in bold headlines, and the trial should be followed on the evening news. Unfortunately, those who do not read the financial press will probably never know this story.

I would like to see fear stuck in the heart of every crooked loan officer in America. While it takes an FBI investigation or a large commitment on the part of an attorney general to uncover fraud of this magnitude, as a Loss Mitigation and Mortgage Default Housing Counselor, I see incidents of fraud on a routine bases.

Some of the fraud that occurs is admittedly hard to prove but anyone who works in this field knows that it occurs. It is not uncommon that loan officers falsify income or employment history to make the borrower more attractive to a lender than they are in reality. I have had several clients tell me that they thought they were getting one loan and then on the day of closing were switched to a different product. I have had clients tell me that they were urged to sign blank loan application documents and never realized their income had been massively inflated. I have seen very suspicious, apparently inflated, appraisals. Document forgery is not uncommon.

I am not so sure we need new laws. The laws already on the books simply need to be enforced. I would like to see Congress appropriate funding to Legal Aid organizations to provide legal assistance to those low-income clients who have been victims of fraud. Our local Legal Aid does a great job but they are so overworked that they can only take the most egregious of cases.

I would like to see more FBI investigation and federal Justice Department prosecution of mortgage fraud and I would like to see more funding of state Attorney General's offices to prosecute these types of cases. And, I wish we had a press that considered the stories of mortgage fraud and abuse to be newsworthy. The message should be load and clear that if you commit mortgage fraud, you go to jail.

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Show Your Support for Your Candidate!

Get involved in this presidential campaign! Let your voice be heard! Show the world how you feel. If you support the policies and character of John McCain, please drive with your headlights on during the day. If you support Obama or Hillary, please drive with your headlights off at night.

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Monday, May 05, 2008

How to be Poor.

There are some people who are born with handicaps and disadvantages and must struggle to overcome their disadvantages, but for most people they have to do really stupid things to stay poor. It is hard to stay poor in America. Having worked with poor people most of my life, I have observed some of the things that people do to achieve poverty. Here is a list. If you want to be poor, these are some of the things you can do.

Become a single mom. This is almost guaranteed to make you poor. A single mother with one child earning $22,000 year is poor. A father, mother and child with a family income of $44,000 are not so poor.

Have children early. Have your children before you finish school or before you are established in a career.

Father children and don’t marry the mother. If you do this then you will have child support payments. If you are determined to avoid child support, you can work in the underground economy and constantly change jobs.

Drop out of high school.

Enroll in college, take out lots of student loans, but don’t graduate. This way, you will have big loans to repay, but won’t have the benefit of the earning power of a college graduate.

Become a criminal. Most criminals are poor. Most drug dealers with their momma. Once you become a criminal it will be very difficult to ever get a good job.

Become a drug addict or an alcoholic.

Take this job and shove it. If your boss is unappreciative, a customer is rude, or you get tired of working the third shift, just walk off the job. It is important to do this without having another job lined up and don’t give a two-weeks notice.

Become satisfied in your dead-end job, stop looking for new opportunities, stop leaning new skills, and stop growing.

Smoke cigarettes, drink beer, smoke dope and play the lottery. If you do this in moderation, it may not make you poor. You may need to do a lot of it.

Don’t learn delayed gratification. Live for today. You want it, you deserve it, get it now.

If you are short of money, use payday lenders. With a payday lender you can borrow $200 and on payday pay back $230. If you don’t have the $230, you can pay $30 and borrow the money for two more weeks, this is only 780% interest. Worrying about the interest rate is something middle class and rich people do.

Don’t take advantage of your employer’s matched retirement plan. If your employer will match up to 3% of your income in a retirement saving plan, don’t fall for it. If he matches your 3% that is a 100% return, and since that is money you do not pay taxes on, that is another 25% return, and if your money and your employers money earns 5% that is a 10% return for you for a total of 135% return. If you do this you will find you are becoming middle class.

Don’t put money in an IRA every year. If you do, that is money you won’t get to pay taxes on. Anyway tell yourself you need it now. You can’t afford to save.

Use the Rent-a-center. If you need a washer and dryer, don’t buy a reconditioned used set for $150; pay $25 a week to rent a new set from the rent-a-center. Also, you can rent nice furniture and a TV and VCR and stereo.

When you do your taxes, get a “rapid refund”. Sure you have waited all year for your money, but you look forward to your refund. Why wait another two weeks when you can have it now? If your refund is $2000 and if cost you $100 to get the rapid refund, since you are only borrowing the money for two weeks that is a 130% interest rate. Don’t worry about the interest rate and don’t wait two more weeks for your money. That is the way middle class and rich people think. You want it now; get it.

Buy a new car. Did you know that most millionaires have never bought a new car? A new car is a rapidly depreciating asset, but a new car smells so good. You deserve it. It will make you happy. Do it!

Always rent; never buy a home. A home is an appreciating asset and the biggest wealth builder for most people.

Value your government handout. Don’t earn too much money or you may lose your section 8 or public housing, food stamps, and Medicaid.

Think like a poor person. Be envious and jealous of people who have more than you do. Keep telling your self that life is unfair and that if other people did not have so much you would have more.

Don’t get “above your raising.” If you are black, don’t let yourself ever be accused of “acting white”. Don’t let anyone ever accuse you of acting like you are better than they are.

Have lots of poor friends. They will make sure you do the things and have the attitudes that keep you poor.

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