Mortgage Fraud Is Now to Blame

While it's commonplace to blame someone, anyone, for the mortgage lending meltdown, indictments are snowballing. Not that the rascals aren't guilty. Robert L. Dodsworth of Erie, Pennsylvania, must have seemed like the godfather to some. He admitted he met folks at the bank, put money into their accounts to document they had money to close on a house, then withdrew the cash. There's more to the story, of course, including the signatures of the buyers swearing that none of their down payment money was borrowed, nor were there any fraudulent statements on their financials. Hmmm…I wonder if they'll be going to jail, too?

Team Lopez in San Diego, including their loan officer and office manager, "admitted that they obtained $1,070,000 in loan commissions from their fraudulent loan activities." Sentencing comes in February, 2008, but others are already reeling from attorneys general with something to prove. Phillip Radmer, a disbarred Berwyn attorney, got off easy with 12 years for defrauding churches of their vacant lots. 

Donna Renae Woods Lawrence of Decatur, Georgia, got 10 years in prison and was ordered in September, 2006, to pay $2,906,176. She participated in hundreds of fraudulent mortgages. After being caught and suspended, she started another mortgage company and wrote another 98 fraudulent loans.

Charles E. Hall, Sr., was sentenced in December of 2006 to over 24 years in prison and restitution and fines exceeding six million dollars.

Stevie L. Johnson of Houston, Texas, was sentenced in November, 2007, to 40 years for his part in 300 fraudulent loans. His co-defendants were sentenced to 25 years and 8 years, respectively.

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Each of these cases is different, but I see a trend toward longer sentences. It isn't that mortgage fraud is blameless. It's that it represents only part of the story. I keep going back to the widespread greed that fanned this wildfire. Here are some of the participants:

• poor people buying houses
• uncreditworthy people buying a houses
• small-time real estate investors adding to their property portfolios
• big-time investors adding to their property portfolios
• flippers, selling above the properties' value
• appraisers partnering for cash
• Realtors
• mortgage brokers and brokerage forms doing whatever it took to push the paper through
• title companies doing the same
• escrow officers doing the same
• lenders not verifying income and credit worthiness
• investment firms bundling too many risky mortgages into resale bundles
• investment rating firms not doing their homework
• Wall Street selling falsely rated investments
• investors buying mortgage-backed securities
• and several categories I've left out..please add to the list in the Comments section below…

Even though the half a dozen names mentioned above could be multiplied 1000-fold, more than even those few are to blame. It's just that right now, it's more popular in the news media to talk about jail time than it is financial illiteracy and the virus of dishonesty that seems to have swept through all socio-economic strata and geographic markets that makes it tempting for everyone to try to get - if not something for nothing then - more for less. Provide as little money, information, documentation and dedication as possible to walk away with as much house, cash, land and prestige as possible.

There's always a line, usually a pretty clear one, between a real estate deal that's a bargain and real estate, mortgage or title paperwork that's fraudulent.

Just because a scapegoat is guilty doesn't mean it's not still a goat!