Today, the FBI and mortgage industry professionals believe 10-15% of all loan applications contain material misrepresentations, i.e. fraud. Many times these fraudulent loans end up in foreclosure resulting in financial losses to mortgage lenders. Unfortunately, many lenders recoup these financial losses from the public by increasing the cost of loans. Fraud hurts everyone. Fraudulent loans only exacerbated the lenders problems. Many times fraudulent foreclosed loans resulted in substantial losses. An example could have been a loan officer who fabricated pay stubs to help a borrower qualify for the loan -- insuring the loan officer collected his commission. Another example could have involved a borrower who submitted falsified tax returns. GAPS investigators researched files for misrepresentation and provided lenders the evidence needed to proceed with civil and/or criminal filings against the perpetrators. So the next time you or a friend applies for a loan, be forewarned: misrepresenting information on a mortgage loan application is illegal. Your information may well be reviewed by AEGIS ™. If a lender detects misrepresentation, federal law provides for those convicted of loan fraud to receive a possible 30-year sentence and up to $1 million in fines! SOURCE: Robert J. Sadler, GAPS/AEGIS ™.

Last time, I wrote about the false sexual harassment allegations made against my friend "John". Well, it turns out there is a lot more to the story. John works as an underwriter for a lender in the non-conforming loan business. This lender receives its loan applications (via company sales personnel) from licensed brokers across the country. His job is to review all credit, income and collateral documents that are used to qualify a borrower for a mortgage loan. In the first few months of his new job, John was given extensive training by his supervisor much like an apprentice gets feedback as he hones his knowledge, skills and abilities. Ocassionally, John would discover fraudulent income documents and immediately report this to his supervisor. Surprisingly, the supervisor would handle it in a somewhat cavalier manner. He would simply instruct John to hand the file back to the salesperson. John never saw the file again. At the time, this did not appear odd to John as he was new at the company and was not educated yet about the company culture. All that changed the day John received the sexual harassment email from his supervisor.

After recovering from the sting of such a false allegation, John began to wonder why and who would make such a libelous and slanderous charge. What was their modus operandi? Well, it didn't take long for John to put "two and two together" or shall I say "one and one together". A few weeks after receiving the email, John was informed by a trusted contact that his accuser had accidently blabbed over drinks of what she had done. His accuser was not the woman his supervisor had hinted at but rather someone who had much to gain by seeing John removed. After all, it was mostly her loans that contained fraud. This woman contributes well over a quarter of the entire sales team's loans each month bringing her very large commissions The supervisor for her and John receives a very large commission each month as well. John earns a straight salary. Who has the competitive political advantage? Or better yet, who has the most to lose? What are John's options? Should he continue to work for this company? Should he report any further fraud from his accuser? Can John trust his supervisor? How far up the corporate ladder does the corruption go? Should John contact the Federal Bureau of Investigation and/or Homeland Security? If John does nothing, can he be considered an accessory after the fact? What should John do?

i feel for your buddy, particularly if he has bills, mortgage and family to support.

watch the fraud increase as loan volume drops. the rising market has been forgiving all sins, at least temporarily. i find it interesting when loan officers work strickly on commission, interesting from a safe distance that is. in these situations, the LO's relationship is with the borrower, not their employer. when they leave, they take the contacts with them, they do not chew their arm off. these situations commonly result in clashes between the "rainmakers LOs" and the speed bump underwriters and appraisal dept, among others. in my experience, the LOs winout more than they should, which i conclude should be almost never. this is a bad set-up as the LOs get paid at closing, just like mortgage hacks - its hard to be objective and lets face it, you probably arent going back to a borker who couldnt close the deal. and dont forget, the real estate sales borkers, title people, escrow, etc, etc, etc, are all looking "to close" to get paid. this is why appraisers dont work on commission, if thats reasonable, is it prudent to have in-house loan hacks working on full commish?

speaking of mortgage hacks (borkers), they have gained tons of leverage in the past few years. they are like loan officers w/o the overhead, except that they really owe no alligence to the bank. they do however put a ton of pressure on salaried minions in the bank to get the loan through; it really could be viewed as a main function - advocacy for the loan/borrower. banks have attempted to strengthen relationships with these loan generators, but we'll see how that works out in the final analysis. i believe they actually rebate to high production borkers, so hey, they are paying extra for any problems.

the "spirit" of banking regs is that the bank handle lending process and that they are the client of the appraiser, not the borrower, loan officer or mortgage borker. the lending decisions/process should be objective, but i suspect a drive to maintain the bottom line and prove recent acquisitions and past rol-ups to be accretive may cloud judgment. also, banks are operating more like loan production houses with less and less loans being portfolioed... so, they generate the loan with attendant charges, fees and points, then theybundle and sell them, sometimes at premiums. essentially, they are brokering the mortgages.

i suspect that if 10% - 15% is the fraud level now, it will increase in amount and extent in the coming down-turn. the pressure on underwriters, processors and appraisers will intensify, particularly at the point where prices begin rolling over - which could be like right now going forward. at the point where comparables sales
are actually above "current" value levels, most will still be ASSUMING an appreciating market. componding the distress will be the markets unfettered use of proforma income/expenses - watch how much poop that really causes!

businesses, including banks, have internal structures and personailities. if it is true that a LO could make an unfounded accusation against a minion such as an underwriter and remain in her position, then i would suggest the corporate structure may be lacking... i had an "issue" in the past and called the Office of the Comptroller of the Currency in San Francisco - this is many years ago, but they were eager to listen to any "problems". i also suspect that lenders that are able to show increasing loan volume during a strong downturn (absent some competitive advantage) should be viewed very critically before investing. i had one client who just did it better than everyone else and they were eventually bought out - the culture is apparently much different now , so there are exceptions.

If he is in New York State, tell him to call Spitzer.

Quit and go to the Feds. Not that it will do any good.

Joe, where did you get that story? It does not sound like original material. Just as a reminder to everyone, if the post is not your original work, please include just a snippet, and a link to the source.

Summary

1. JoeBialek is using a web robot to make postings.

2. Joe's posting provides a valuable contrary indicator into where the mortgage-lenders are hiding their losses.

3. Joe [aka "my friend John"] has publicly reported an address in Cleveland; and has now made public accusations of fraud. There's an address that someone at the FBI can look at and find out if this "Joe" is the same "John" who's alleging fraud.

Public postings on mortage related topis

JOEBIALEK
SAME