Banks create bank fraud, creating tax foreclosures. Post 92

Coach Mitch’s REFLECTIONS

 

The mortgage banking cover-up

The real, banking “fraud” that is not spoken about is: the investors on Wall Street and the Hedge funds along with the banks create the banking programs. They are the ones who set the rules.

A No Income Check, No Asset Check, NIC NAC, loan does not get created unless the banks create it. Additionally, the bank’s Underwriting Department lets Loan Originating officers know exactly how much they can “get away with.”

A citizen does not know very much about bank fraud – he must be educated about how to defraud the bank – by the Loan Officer. The Loan Officer gets his limits from the bank Underwriters, who get their guidelines from the banks senior personal, who, in turn, work with the Nome’s from Wall Street to determine how loose the underwriting will be, which is based upon how many bonds Wall Street can sell.

Just follow the money…

It’s a vicious circle. I am saddened to see our leaders allow practices created to enrich one set of Americans at the cost of another set of Americans.

Just so you know, I have been doing mortgage origination for 20 years. I have seen many banking programs come and go. I have seen several cycles. First, there is loose money. That is the Fed and bank policy. Just lend. The consequences will take care of themselves. And they do. The Fed and the banks are in charge of a great part of the economy.

During the last boom, from 1985 to 1991, I saw the same things happen. The banks credit criteria was downgraded, underwriting criteria was loosened, dubious bank programs were created and loans were granted to those who would almost surely go into foreclosure.

Then, just as now, the mud hit the fan when the Savings and Loan crisis emerged. The banks were bailed out to the tune of 600 plus BILLION dollars. Credit was tightened up, few loans were made, the economy faltered, taxes were raised and George Bush lost his reelection bid.

An example of the goings on:

One time I asked a bank rep if the bank checked the veracity of the down payments. The bank representative, “Yes, we do check the down payments.” Now, this sounds ominous, doesn’t it?

Then I asked, “How? What is required?” You would think that the bank, thinking of lending $200K would want to see the bank deposit records from where the down payment monies had been deposited over an extended period of time, right? The bank rep said, “Just take your down payment, say $5000, and copy the bills on a copier. That is sufficient proof.” I knew then that virtually any applicant would be accepted by this bank. The bank was not serious in checking for an applicants’ financial strength. They were merely interested in getting the $2000 to $5000 in fees that would be generated with each loan.

If I were to tell this to an applicant who does not have $5000, they might go to Kinko’s with a friend who does have $5000, copy the bills, and provide me with a copy to give to the bank; thus satisfying the down payment requirement. The applicant defrauds the bank in order to get a house and the friend goes home with his $5000 intact, knowing that he helped a friend get a house. The applicant could even take $1000 and copy them five times, mixing up the bills so as to make it a bit harder to track the serial numbers, but knowing that the bank would not check.

It is all pre-planned

Of course, the Wall Street boys know that this fraud will happen. The bank rep will always say that the bank assumes honest behavior by applicants. They have created plausible deniability. The banker creates the loan, with its attendant fees, the overseas investors get to invest in American bonds, and an American gets a piece of the American dream.

Unfortunately, it is all built upon a house of cards. It is like asking every person swimming across the Rio Grande, “Are you an American citizen?” and, when they say, “Yes.” you just let them pass into America. You can say that, “I checked.”, but did you really check in the manner that we expect you should in order to create a stable, secure border? No. It was entirely predictable that at some point these poor practices would blow up in our faces. There is much tension on the border and we still don’t know the extent of the bank failures.

Another example of the goings on:

I had a client who had gotten one of those “Do-It-Yourself” log cabin kits. He had done pretty well in the construction, but, as always happens, he ran out of money before the house had been completed. To make matters worse, the temporary construction loan had come due and needed to be paid off by putting the end financing in place.

This was a real dilemma. No bank will give a regular 30 year bank loan on a house that is not complete and without a Certificate of Occupancy. Of course, in times of loose credit, anything is possible. I asked around and found a bank that would do the loan.

I never lie to a bank. Of course, I carefully choose the bank I give any particular loan application. Some are known to be strict; others are known to look the other way on almost anything. If there are any unusual aspects to the loan, I always inform the bank and ask how the bank wants me to proceed. If the bank wants the loan, they will tell you how to structure the loan so that all parties are hoodwinked protected.

In this case, the bank told me, “OK. Tell the appraiser to only take pictures that DO NOT depict any parts of the house that are still under construction.” I could not believe my ears. But, my job is to get my clients a loan – with the bank having full knowledge of the circumstances. I did just as the bank instructed.

Four days prior to the closing, I was informed that the bank had been shut down by the FBI for making fraudulent loans. No wonder!

The credit crackdown was then in full swing and no loan could be acquired. The home went into foreclosure; the couple went bankrupt and divorced. Very sad.

This time it’s worse

In this credit extravaganza, the banks have allowed folks to overindulge their appetites. The big items are Adjustable Rate Mortgages, Interest Only Loans and 125% loans. I have never liked any of these and have always counseled against taking them.

See Coach Mitch’s “Ridiculously Simple System…”for details.

I hope you had a good day,