It's not my intent to defend anyone KK, simply stating what I know from first hand experience is all,......and I haven't proclaimed to be an expert on anything.
Was there retail side fraudulent activity? You bet there was. Personally turned in a broker shop that was openly forging W2 forms to show higher income than what was actually made, if the borrower had a job at all. Did that fraudulent activity constitute 80% of the mortgage market? Not an effing chance. Did the FBI cherry pick the loans it used for it's report? Perhap someone should ask them or you should provide some info on this 2004 report.
The crux of the issue though is what the FBI considers to be fraud and how they come to the conclusion that the lender/broker is responsible for said fraud. If the fraud is the "liar loan" itself than the gov't and state DFI's nationwide must bear the responsibility for allowing the product to exist. Mortgage lenders don't just invent new products without them being approved by a state department of financial institutions,.....but you already knew that. If the fraud is the fact that the income on the application was misrepresented than the borrower is who committed the fraud. If these are considered the frauds, which I think they are, then there is no doubt in my mind as to Black's 90% figure for the lair's loans. If that is different, as you say it is, then show me where Black distinguishes who the frauds were committed by.
We should be clear to draw a distinction between lenders, wholesalers, and brokers as well when fraud is concerned. I spent the majority of my career working for wholesalers. We operated on large credit lines provided by lenders or brokerage houses like Lehman, Goldman, exc. with preapproved mortgage products to sell to mortgage brokers. We underwrote, funded, and packaged the loans and sent them back to the lender in exchange for a fee based on yield speads and volume. That in turn bought us a new credit line for the next month to fund new loans. I can tell you that the underwriting process was taken very seriously where fraud is concerned. One fraudulent loan package was not worth the regulatory trouble, let alone our warehouse credit agreements. Mortgage brokers operated under the same premise. One bad loan, or loan officer, was not worth losing a wholesaler that provided the mortgage product for them to sell.
If the fraud being considered or talked about on the lender side is that of representations on the quality of liar loan packages to investors, well, I can believe the 90% figure in that case too. Something that really should have been picked up by the SEC and the ratings agencies. Somewhere there was a total disconnect as to what was being packaged and sold,..........and what the buyers thought they were getting. I wouldn't even know the types of documents that could potentially be fraudulent in those scenarios, I'm not even going to try. What I do know is that the gov't would have had to look the other way for it to even occur.
Bottom line is that for you to pontificate from on high that it's clever loan officers committing 80% of the fraud in the industry and suggesting someone you don't know from Adam may have been party to such fraud, truly shows your ignorance to the issue at hand. Like I said before, stick to the things you know; TeaBagging, goats, mowing lawns, not catching fish, and whatever else it is you do with your time.
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