Why is the FBI looking into Mortgage Companies?

[Dinner]

I honestly don't know what to make of this. Like everyone else I've heard the news that the FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers, and AIG for "possible fraud". The problem is no news reports go into any detail about exactly what sort of fraud was supposed to have occurred. Is this just a routine looking over of the books because these companies have (defacto) failed or is there more to this story?

[AngieC]

Maybe they think it's a good time for a fancy new HQ

[rah]

Typical Scapegoating. Nothing to see here.

[Arrian]

Yeah, my first guess is "witch hunt."

Things are pretty bad. People may be looking around for torches and pitchforks.

-Arrian

[Patroklos]

Well, I don't think it is an unreasonable assumption that with things going the way they are somebody was doing something unbecoming.

A witch-hunt to be sure, but one with a reasonable chance of success. I suggest the start with Raines.

[DirtyMartini]

Why wouldn't they look at them?

"Gee whiz, I don't know WTF happened. Oh well, I still got paid. See you later, I'm moving to Canada."

Now the American taxpayer pays for their mistakes...twice.

For some nice righteous indignation over the bailout culture, see TMQ on ESPN page 2.

[Lefty Scaevola]

Re: Why is the FBI looking into Mortgage Companies?

Originally posted by Oerdin
The problem is no news reports go into any detail about exactly what sort of fraud was supposed to have occurred.

My news must be better than your news, it states (what should be an obvious guess anyway) that there are 26 investigations for finacial statement fraud, overstating the value of their assets on finacials and other required reports.

[DirtyMartini]

Re: Re: Why is the FBI looking into Mortgage Companies?

Originally posted by Lefty Scaevola
My news must be better than your news, it states (what should be an obvious guess anyway) that there are 26 investigations for finacial statement fraud, overstating the value of their assets on finacials and other required reports.

this must have been happening, right? these banks etc. couldn't have been in the dark about what was going -- they must have been cooking the books to some degree.

[chequita guevara]

The question isn't, why are the Feds investigating, but rather, why are there so few investigations? There was rampant fraud involved in creating this mess. A lot of people deserve prison time.

[PLATO]

Originally posted by Comrade Snuggles
The question isn't, why are the Feds investigating, but rather, why are there so few investigations? There was rampant fraud involved in creating this mess. A lot of people deserve prison time.

QFT

In investigating early payment defaults where the borrower misses one of the first three payments (EPDs in the industry), we found that over 90% of them involved fraud on one level or another.

There is no doubt that Mortgage Fraud is the single overwhelming factor in all this. You can talk all you want about lax underwriting (which is true) and exotic programs (which is true), but the fundamental problem is that people from the borrowers to the loan officers to the managers to the lenders to the investment banks to the rating agencies there is a trail of lies at every step.

[Dinner]

Re: Re: Why is the FBI looking into Mortgage Companies?

Originally posted by Lefty Scaevola
My news must be better than your news, it states (what should be an obvious guess anyway) that there are 26 investigations for finacial statement fraud, overstating the value of their assets on finacials and other required reports.

I mostly listen to the radio at work or get news on the internet. None of my regular sources went into any detail thus the thread. No need to get hostile I phrased things as open mindedly as I could.

[Dinner]

Originally posted by PLATO


QFT

In investigating early payment defaults where the borrower misses one of the first three payments (EPDs in the industry), we found that over 90% of them involved fraud on one level or another.

There is no doubt that Mortgage Fraud is the single overwhelming factor in all this. You can talk all you want about lax underwriting (which is true) and exotic programs (which is true), but the fundamental problem is that people from the borrowers to the loan officers to the managers to the lenders to the investment banks to the rating agencies there is a trail of lies at every step.

What do you attribute these early defaults too? Was it just mortgage brokers looking for commissions and so signing loans to people they knew wouldn't be repaid?

[PLATO]

Originally posted by Oerdin


What do you attribute these early defaults too? Was it just mortgage brokers looking for commissions and so signing loans to people they knew wouldn't be repaid?

I think there was a lot of that going on. Inflated values play a part in it. Borrowers that knew how to play the system.

I would say though that by far and away you are probably correct.

[Swissy]

Originally posted by Oerdin


What do you attribute these early defaults too? Was it just mortgage brokers looking for commissions and so signing loans to people they knew wouldn't be repaid?

That's the dirty little secret of the home mortgage industry. The brokers know there are certain loan profiles that will always be bought by Freddie or Fannie. They know banks and mortgage companies will fund them knowing they will be bought by Freddie or Fannie. They also know how to package the documentation to insure the loan gets done. If the broker uses multiple funding sources and mixes in good loans, it will take some time before somebody catches on that the broker is cooking some of loan documents.

[DirtyMartini]

Aren't all mortgages less then 417k purchased by Fannie and Freddie?