Despite Widespread Wrongdoing, Fed’l Prosecution of Institutions Involved in Mortgage Mess is Rare

Figure 6: Top Mortgage Fraud States by
Multiple Indicators, 2009

Posted Dec 22, 2011 2:35 PM CST
By Martha Neil

Despite widespread evidence of fraud and other wrongdoing, federal prosecutions related to the reckless mortgage lending that nearly brought down the nation's banking system in recent years are few and far between.

From the "robosigning" of thousands of mortgage foreclosure documents by individuals who apparently didn't have authority to do so to the thousands of active-duty members of the military who have lost their homes to foreclosure, even though they are legally eligible for stays and it is a misdemeanor to refuse to grant them, serious documented problems with the system abound concerning these and other issues, according to a Reuters special report.

"I think it's difficult to find a fraud of this size on the U.S. court system in U.S. history," said visiting Yale Law School professor Raymond Brescia. "I can't think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases."  READ MORE

SEE ALSO:
2009 Mortgage Fraud Report “Year in Review”

On the Trail of Mortgage Fraud

By The New York Times | Editorial

17 January 12

Queens has been harder hit by foreclosures than any other New York borough, and the Federal Bureau of Investigation believes it has found a culprit. Last July, the F.B.I. accused Edul Ahmad, a local broker, of a $50 million mortgage fraud, saying he lured fellow immigrants into subprime mortgages, inflated the values of their properties and concealed his involvement in deals that were ruinous for scores, if not hundreds, of borrowers. Mr. Ahmad pleaded not guilty, and posted $2.5 million bail. Now, according to court papers, as reported in The Times, he is plea-bargaining with federal prosecutors.

Whatever Mr. Ahmad did or did not do, one thing is sure: he did not act alone. The attention Mr. Ahmad has drawn highlights the relative lack of scrutiny of the big banks and their senior executives. Big banks created demand and provided credit for dubious mortgage loans, which they bundled into securities and sold to investors. If not for reckless lending and heedless securitizing, there would have been no mortgage bubble and no mortgage bust - and, in all probability, no Edul Ahmad.   READ MORE